L Capital, an investment company affiliated to the world’s largest luxury goods conglomerate LVMH Moet Hennessy Louis Vuitton SE (LVMH), pledged $50 million (57.3 billion won) in South Korea’s homegrown cosmetics company CLIO Co. This is the first time for luxury goods conglomerate to make an investment in a Korean cosmetics company.

According to the investment banking industry on Monday, L Capital plans to invest about $50 million in redeemable convertible preference shares (RCPS) issued by the cosmetics company. RCPS represents convertible preferred stock that is redeemable at maturity. The preferred stock may be converted into common stock under certain conditions at the predetermined ratio at the option of preferred stockholders. These shares are subject to mandatory redemption requirements or have a redemption feature that is outside the control of the issuer. The anticipated shareholding is estimated at around 10 percent when the shares are converted. CLIO which has been pursuing initial public offering (IPO) within this year would receive money from L Capital before its IPO. The two plan to sign an official investment contract within this week. This is the second time for L Capital to invest in a Korean company. The capital invested about 60 billion won in YG Entertainment Inc. through purchase of allocated preferred shares in 2014 to become the second largest shareholder of the entertainment company.

IPO prospects for CLIO would brighten with the funding pledge from major foreign name. The cosmetics company selected NH Investment & Securities Co. as an agency in charge of the IPO and is expected to apply for the preliminary IPO review within this month. The company hopes to be listed on the secondary Korea Securities Dealers Automated Quotations (Kosdaq) market.

Founded in 1997, CLIO sells cosmetics and makeup tools. Sales of the company were no more than 50 billion won until 2014. But they ballooned to 107 billion won last year. Its operating profit also reached 22.5 billion won. Thanks to the improved performance, the anticipated market value after IPO is estimated at over 1 trillion won.

The luxury brand’s investment in cosmetics maker underscores how hot Korean beauty and skin care companies have come.

With surging demand for Korean cosmetics in Asian countries including China, more and more foreign companies believe Korean cosmetics companies are worth investing. According to the Korean International Trade Association, the nation’s exports to China came to $285.8 million in 2013 and the figure increased to $533.6 million in 2014. Last year, the exports grew more than 100 percent from the previous year to reach $1.1 billion. From January to September last year, Korean companies ranked second in the Chinese cosmetics market following France, beating Japan and the U.S.

With the slowing global luxury industry and growing cosmetics industry, LVMH is looking to cosmetics as its steady growth engine. Currently, LVMH owns nine cosmetics brands including Fresh and Make Up For Ever.

By Kang Doo-soon, Kim Hyo-hye and Park Eun-jin

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