Castro enters K-Beauty market: Subsidiary Urbanica forms joint venture with South Korea's Silicon2

Castro Group makes a strategic move to expand into cosmetics. Subsidiary Urbanica signed a term sheet with South Korean distribution giant Silicon2 to establish a K-Beauty retail chain in Israel.

Castro Group announced that its subsidiary, Urbanica, signed a non-binding term sheet with South Korea's Silicon2. The parties will establish a joint venture (70% Urbanica, 30% Silicon2) to import and sell Korean cosmetics (K-Beauty) in Israel under the 'Moida' brand. Initial investment in the venture will stand at $20 million.

Fashion group Castro Model Ltd. (TASE: CAST) announced today a major strategic move into cosmetics, after its subsidiary, Urbanica (Palo) Retail Ltd., signed a term sheet to form a joint venture with South Korea's Silicon2 Co., LTD. The filing by Castro, the public parent company, confirms and clarifies the ownership structure of the deal, initial details of which were reported earlier by Urbanica itself. The move signals Castro Group's broader intent to diversify its revenue streams and penetrate the growing cosmetics market, leveraging the surging popularity of Korean skincare products (K-Beauty) in Israel and worldwide.

The venture partner, Silicon2, is a leading global distributor of K-Beauty products listed on South Korea's KOSDAQ exchange. Under the term sheet signed on September 22, 2026, a new joint venture company will be incorporated in Israel, with Urbanica holding a 70% stake and Silicon2 holding the remaining 30%. The joint company will operate under the 'Moida K-Beauty' brand, owned by Silicon2, which already operates through brick-and-mortar stores and online platforms in Asia, the U.S., and Europe. The venture's operations in Israel will focus on importing, marketing, distributing, and retailing a wide range of Korean cosmetics purchased from Silicon2, along with complementary lifestyle products.

Planned initial investment in the joint venture totals $20 million, to be injected by both companies in proportion to their respective holdings. Castro Group's share, via Urbanica, will stand at $14 million, while Silicon2 will invest $6 million. These funds will be used to establish the brand's operational, logistical, and marketing infrastructure in Israel, including store build-outs and sales channel development.

The partnership with Silicon2 gives Castro Group a significant strategic advantage. Silicon2 distributes hundreds of K-Beauty brands and possesses extensive global expertise and connections in the field. Under the agreed terms, the joint venture is expected to receive exclusive marketing and distribution rights for Silicon2 products in Israel, as well as enter into a long-term supply agreement. The planned business model is omnichannel, encompassing a physical store chain, wholesale operations targeting other retailers, and a dedicated e-commerce platform. This strategy allows broad and rapid market penetration across diverse target audiences.

For Castro Group, the move marks another step in its diversification strategy. After years of focusing on fashion, the group is expanding into a complementary sector with high growth potential. The global K-Beauty market has experienced impressive growth in recent years, driven by product innovation, viral social media marketing, and a perception of high quality at accessible prices. Entering the category alongside an established partner like Silicon2 mitigates the risks associated with developing a new product line from scratch.

According to company estimates, actual operations of the venture are expected to commence during 2027. However, Castro emphasized that the term sheet reflects only the intentions of the parties and serves as a framework for negotiations toward definitive, binding agreements. Transaction completion is subject to successful negotiations, execution of final agreements, and receipt of all required regulatory approvals. The filing noted that "there is no certainty that negotiations will mature into binding agreements or that the transaction will be completed."