Temasek, China Investment-KKR advance to second round of bidding for Yum Brands China unit
20 May 2016
Singapore's sovereign wealth fund Temasek Holdings and a consortium that includes China Investment Corp (CIC) and US private equity firm KKR & Co have advanced to a second round of bidding for a minority stake in Yum Brands Inc's China unit.
Another private equity-backed consortium has also moved to the second round, although its identity could not be immediately confirmed, Reuters yesterday reported, citing, people familiar with the matter.
Yum Brands Inc, owner of KFC, Taco Bell and Pizza Hut, was in March reported to be in talks with several private equity firms to sell around 20 per cent stake in its China operations. (See: Yum Brands in talks with PE firms to sell minority stake in China operations) The Chinese business is worth around $10 billion.
Yum, which has a market value of $32 billion, had last October announced that it plans to spin off its China operations by the end of 2016.
The Kentucky-based company operates 6,900 restaurants in China, which account for about half of the company's annual sales of $13.11 billion.
The move comes in response to investor pressure due to slower-than-expected growth in the world's second-largest economy.
Some bidders would be keen to buy control of the China business, but Yum is sticking to the minority stake sale plan because it is more tax-efficient, the report said.
It was not clear if these bidders would pursue a transaction if Yum does not adjust plans and offer a controlling stake for sale, the report added.
So far, Yum Brands, the first foreign fast food chain to enter China, has been operating and building restaurants directly in the country, while elsewhere in the world it runs most of its business through franchisees.
The company had expected to nearly triple the number of restaurants in China to over 20,000 and also expected significant growth potential in its existing restaurants.