Bling meets K-pop: LVMH fund invests in Psy producer YG (updated)

YG Entertainment

20/08/2014 10:48

(Adds details, background) 
    By Joyce Lee 
    SEOUL, Aug 20 (Reuters) - The private equity arm of French 
luxury goods giant LVMH  LVMH.PA  will invest up to $80 million 
in South Korea's YG Entertainment Inc  122870.KQ , which manages 
a stable of K-pop performers including "Gangnam Style" rapper 
Psy. 
    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  069110.KQ , 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. 
     
    BEYOND MUSIC 
    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. 
 ID:nL4N0QJ03Y  
    However, it has been more proactive at diversifying beyond 
music than rival management agencies S.M. Entertainment 
 041510.KQ  and JYP Entertainment Corp. 
    Shares in YG rose 3.1 percent, beating a 0.1 drop in the 
wider KOSDAQ  .KQ11 , 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 
 SOHU.O  invested 15 billion won in South Korean talent agency 
Keyeast Co Ltd  054780.KQ  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) 
 ((jungyoon.lee@thomsonreuters.com; +82 2 3704 5609; Reuters 
Messaging: jungyoon.lee.thomsonreuters.com@reuters.net)) 
 
Keywords: YG ENTERTAINMENT INVESTMENT/