SEOUL (Reuters) - South Korea apparel and retail firm E-Land Group is selling a youth clothing brand to China’s V-Grass Fashion Co Ltd (603518.SS) for nearly $900 million, cashing in on a boom in Korean fashion and cosmetics China to raise funds to cut debt.
E-Land, South Korea’s biggest apparel retailer, said on Friday it expected to close the sale of its Teenie Weenie business for around 1 trillion won by the year-end. It said the sale will help cut its debt-to-capital ratio by about a third.
The Teenie Weenie deal comes amid surging demand in China for Korean products, led by the success of cosmetics firms tapping massive interest among Chinese consumers in Korean TV dramas and K-pop music.
“Korean fashion companies are embracing trends very quickly,” Lee Gyu-jin, vice president at E-Land Group, told Reuters. “Teenie Weenie has strength of both Korean firms and localized Chinese firm.”
Launched in China in 2004, Teenie Weenie already has a strong profile for its casual clothing aimed at teens and early 20s shoppers. It operates 1,400 department store and other outlets there with annual revenue of 420 billion won, E-Land said.
The purchase is a sizeable investment for Shanghai-listed V-Grass, a women’s apparel firm with a market value of about $685 million that is little known outside China. V-Grass said it planned to release a statement later on Friday setting out details of the transaction and how it will be paid.
Earlier this year V-Grass said it planned to raise up to 1.35 billion yuan ($202 million) in a private share placement “to fund projects”.
China International Capital Corporation advised E-Land on the deal, while China Securities Co Ltd advised V-Grass.
Separately, E-Land Group said it had dropped a plan to sell its Kim’s Club hypermarket chain to U.S. private equity fund KKR & Co LP (KKR.N), citing differences over price. Wire service Yonhap had reported E-Land was seeking between 700 billion-1 trillion won for the business.
Reporting by Joyce Lee and Hyunjoo Jin; Additional reporting by Se Young Lee in SEOUL and BEIJING newsroom; Editing by Kenneth Maxwell