Yum Brands Inc is in talks with private equity firms KKR & Co LP and Hopu Investments, among others, over the sale of a minority stake in its China operations as it prepares to spin off the once booming unit, two sources familiar with the plans said on Thursday. Several other Chinese investors were also looking into the deal, said the sources, who declined to be named because details of the transaction aren’t public. Yum plans to spin off its 6,900 restaurants in China, which account for about half of the company’s total sales, by the end of 2016. Yum China will list on the New York Stock Exchange, and possibly in Hong Kong. The China business could be valued at about $10 billion, analysts and bankers estimate based on its core earnings. Yum Brands Inc, the home of KFC and Pizza Hut, has been falling behind rival McDonald’s Corp as the pair battle to revive flagging sales in China – a headache for Yum as it looks to spin off operations in its biggest market. “We continue to make good progress since we announced the transaction separating Yum and Yum China,” a Yum spokesperson said in a statement emailed to Reuters. “We will provide updates on the transaction at appropriate times and we won’t comment on rumors or speculation.” Yum’s China sales dipped 0.4 percent in 2015, after two years of flat line growth, underlining how managers have struggled to repair its reputation since a series of food safety scares over the last few years. Chinese diners once flocked to its outlets – as well as to McDonald’s – helping drive revenue growth of nearly 30 percent each year between 2006 and 2012. Hopu Investments is China-based private equity firm co-founded by former Goldman Sachs banker Fang Fenglei. Hopu was not available for an immediate comment while KKR declined to comment. Singapore state investor Temasek Holdings had been approached about the deal, but it was unclear whether talks were ongoing, one source said. Other investors looking into the deal included Baring Private Equity Asia, said the Wall Street Journal which initially reported the deal. Yum appeared to be intent on selling a 19.9 percent stake to avoid a big tax bill, the Journal said. Baring declined to comment. Yum’s China business has been recovering after being hurt by food scandals and marketing missteps in 2014 and 2015. Yum’s sales at established restaurants in China rose 2 percent in the fourth quarter, the second increase in 1-1/2 years. Yum China earned $1 billion before taxes, interest, depreciation and amortization (EBITDA) last year. Shares of the owner of the KFC and Pizza Hut chains closed nearly 2 percent up at $80.55 on Wednesday. The stock has gained 10.3 percent since unveiling plans to spin off the China business last October.
Source: Reuters.comYum in talks with KKR, Hopu, to sell stake in China unit
Industry: Food and beverage 2016-03-24
