Yum Brands in talks with PE firms to sell minority stake in China operations

26 Mar 2016

Yum Brands Inc, owner of KFC and Pizza Hut, is in talks to sell a minority stake in its China operations to private equity firms including KKR & Co and others, The Wall Street Journal reported, citing sources familiar with the plans.

Yum, whose restaurant brands also include Taco Bell, is also in talks with Baring Private Equity Asia and several Chinese funds to sell around 20 per cent stake in the business. The Chinese business is worth around $10 billion.

Yum, which has a market value of $32 billion, had in last October announced that it plans to spinoff its China operations by the end of 2016. (See: Yum Brands to spin off China business)

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 on the back of slower-than-expected growth in the world's second-largest economy.

Yum China will become a franchisee of Yum Brands and will have exclusive rights for three popular brands - KFC, Pizza Hut and Taco Bell, while Yum Brands, will focus on expanding the presence and performance of its three iconic brands around the world.

Yum initially plans to list the new China company on the New York Stock Exchange, and later have a dual listing on the Hong Kong stock exchange or to fully migrate there, the report said.

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 expects that there is potential to nearly triple the number of restaurants in China to over 20,000 and also has significant growth potential in existing restaurants.