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By Joyce Lee
SEOUL Aug 20 The private equity arm of French
luxury goods giant LVMH will invest up to $80 million
in South Korea's YG Entertainment Inc, which manages
a stable of K-pop performers including "Gangnam Style" rapper
The investment is one of the biggest bets by a global fund
in the "Korean Wave" of culture, including music, TV shows and
consumer products like cosmetics, that has grown in popularity
in Asia and globally. The move could also help accelerate YG's
push into fashion.
YG and LVMH, the world's largest luxury goods maker, are
also in talks for a strategic partnership, said Eai-Jin Song,
who heads YG's investor relations team, declining to elaborate.
YG has previously said it will launch a joint venture
fashion brand with Samsung Group fashion unit Cheil Industries
this quarter. YG is also expected to enter the cosmetics
business, partnering with China's Huanya Group and local makeup
manufacturer Coson Co Ltd, analysts have said.
"I expect the investment would enable YG to enter the
fashion industry. YG will be able to leverage its performers to
expose and market fashion products," said Hong Jung-pyo, an
analyst at Kiwoom Securities.
L. Capital Asia will invest 61 billion won ($60 million) in
new preferred shares of YG and is in talks to buy another $20
million in shares from Yang Hyun-suk, the former K-pop star who
founded YG and is its largest shareholder, according to a YG
filing. It will become YG's second-largest shareholder.
YG is one of South Korea's three main K-pop talent agencies,
with acts including Big Bang and 2NE1 and a market value of $690
million as of Wednesday's closing.
"It hasn't been that long that South Korean cultural
projects have shown profit, but returns are improving and
foreign investors are showing more interest, especially for
success cases like YG," James Park, director-general at the
Korea Venture Capital Association, said last week.
LVMH and YG have worked together before.
When YG-managed rapper-producer G-Dragon, a member of Big
Bang and a fashion icon, released his solo album in 2009, LVMH's
Louis Vuitton was the clothing sponsor, the first time the
luxury brand backed a South Korean singer.
Shares in YG had lost more than half their value from a 2012
peak before local media last week reported a possible investment
by LVMH's funding arm, as investor concerns about the continued
profitability from K-pop deflated previous bullish valuations.
However, it has been more proactive at diversifying beyond
music than rival management agencies S.M. Entertainment
and JYP Entertainment Corp.
Shares in YG rose 3.1 percent, beating a 0.1 drop in the
wider KOSDAQ, ahead of Wednesday's announcement, and are
up 13 percent since reports of the possible investment.
Yang has been a judge on talent search show K-Pop Star since
2011 and has led YG's nascent expansion into actor management.
YG's artists are often seen as having a high level of creative
control by the heavily produced standards of K-pop.
Earlier this month, Chinese internet portal Sohu.com
invested 15 billion won in South Korean talent agency
Keyeast Co Ltd through a subsidiary, becoming its
second-largest shareholder. Keyeast manages Kim Soo-hyun, one of
the stars of blockbuster K-drama "My Love from the Star."
(1 US dollar = 1,022.60 Korean won)
(Additional reporting by Hyunjoo Jin; Editing by Tony Munroe
and Matt Driskill)