South Korea’s E-Land Group sold clothing label Teenie Weenie to Chinese fashion house V-Grass Fashion Co. in a 1 trillion won deal (US$900 million). That is more than V-Grass is worth, warns branding expert Ben Cavender in Bloomberg, and might be very hard to recover in sales.
The acquisition, at a price which could outstrip V-Grass’ market capitalization of about $685 million, comes as Chinese middle-class shoppers shift to higher-priced premium purchases. Meanwhile, in Korea, E-Land and other retailers are struggling to attract consumers to stores and malls as more shoppers there spend record amounts making purchases on their mobile devices.
While the purchase will help V-Grass extend its brand, it will likely take on debt to finance the sale and compete against international labels, said Ben Cavender, a China Market Research Group analyst.
“The Chinese brands are hunting for new brands to add to their portfolio, so the strategy here for V-Grass is to get a brand that’s targeted at a very different shopper profile from their own,” Cavender said. “They’re paying a ton of money, and Teenie Weenie is in a segment where it’s tough going head-to-head with established fast-fashion brands like Uniqlo and Forever 21.”
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