L Capital Asia to invest in Korean talent manager

The investment will be structured as a subscription to new preference shares issued by locally-listed YG. Negotiations are ongoing with Hyun-Suk Yang, YG's founder and largest shareholder, to buy a further $20 million in ordinary shares, according to a regulatory filing. L Capital will become the second-largest shareholder.

Yang founded YG in 1996 after retiring from Seo Taiji and Boys, a highly-successful South Korean boy band. He owns 34.6% of the company and remains its main producer, helping to develop a string of K-pop acts. In addition to Psy, YG works with the likes of Big Bang, 2NE1 and Akdong Musician.

The company operates under a three-phase strategy. It casts, trains, produces and develops new talent and then establishes these fledgling acts domestically across multiple media, including music, events, broadcasting, games, advertisements and merchandising. This is followed by efforts to take acts into other Asian markets and finally the US and Europe.

YG reported net income of KRW13.9 billion in 2013, down 18.6% year-on-year. Sales increased 6% over the same period to reach KRW105.7 billion. Its primary domestic competitors are SM Entertainment and JYP Entertainment.

YG is said to be in discussions with LVMH over a potential strategic partnership, with the Korean company keen to enter the fashion industry. Business diversification is seen as essential for Korean record labels and talent management agencies amid investor concerns about profitability.

L Capital reached a first close on its second regional fund last September at the hard cap of $950 million after less than six months in the market. The final close, which included the GP commitment, followed a few months later.

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