YG Entertainment, South Korea's high-brand entertainment agency who has Psy as its client, said Wednesday it will sell new shares worth 61 billion won ($69.7 million) to the investment fund arm of French luxury group LVMH, a move seen as paving the way for expanding its fashion business globally.
YG Entertainment said it will issue 1.35 million convertible preferred shares, which are priced at 44,900 won, through a third-party allotment with L Capital Asia, the Asian trading arm of LVMH. The preferred stocks can be converted into common stocks a year later.
"(The stake sale) is aimed at long-term development and entry into new business," the company said in a regulatory filing without giving further details.
Once the breeding ground of hip-hop musicians, YG Entertainment has grown into one of the top three record companies in South Korea, featuring big-name K-pop stars including Psy, Big Bang and 2NE1.
The announcement came amid speculation that the Seoul-based management agency is in talks with the French luxury house to enter the global fashion business as it has been putting more resources into fashion and consumer brand development.
The company, which is known for bold, extravagant fashion style, is set to launch a new fashion brand, NONA9ON, next month in collaboration with Cheil Industries, Samsung Group's fashion division.
The brand will feature fashion icons G-Dragon of Big Bang and CL of 2NE1 as models to target trend-savvy youngsters, the company said earlier.
Last year, YG Entertainment teamed up with China's No. 3 cosmetics firm Guangzhou Huanya Cosmetics Technology and Korean cosmetics manufacturer COSON to start a beauty business in the world's most populous nation.
The possible collaboration with LVMH, known for luxury brand Louis Vuitton, was seen as part of its "one-source, multi-use" strategy to diversify its revenue sources.
"YG Entertainment has already launched a joint venture with Cheil Industries for a new clothing brand, but joining hands with the French luxury group will certainly upgrade it's global brand image, which is a boost to the company in the long term," said Kim Chang-kwon, an entertainment analyst at KDB Daewoo Securities.
Its shares closed at 46,000 won at the secondary-KOSDAQ market on Wednesday, up 3.14 percent from the previous session. The new share announcement was made after the market closed. (Yonhap)