Little Sheep in Yum-my deal
By Jin Jing |
May 14, 2011, Saturday
|
Print Edition
Print Edition
UNITED States-based Yum! Brands Inc yesterday announced plans to buy out China's hot-pot chain Little Sheep Group Ltd in a deal valued at HK$4.56 billion (US$586 million).
Yum, the operator of KFC and Pizza Hut fast-food chains, offered to buy Little Sheep shares for HK$6.50 per share in cash, a premium of 30 percent. Little Sheep shares closed at HK$5 on April 21, when trading was halted.
The buyout will give Yum a 93.22 percent stake in the company, leaving the rest to the Hong Kong-based company Possible Way International.
The buyout has to be approved by China's Ministry of Commerce and other regulatory agencies.
If it does get the nod, Zhang Gang will remain the board chairman while Chen Hongkai will continue as company director. Zhang will also be named as founding chairman of Little Sheep.
"Yum's dominating position in the global market will be of great use to Little Sheep's brand awareness and help it gain advanced management expertise," said Liu Ludan, an analyst at Industrial Securities.
"Yum will also benefit from adding a Chinese-style chain into its global portfolio," Liu added.
Yum bought into Little Sheep in 2009 and increased its shareholding to 27.2 percent last year.
"Market competition for China's highly fragmented catering industry has intensified over the past few years," said Samuel Su, chief executive officer of Yum's China division, adding Yum was keen to further improve Little Sheep's brand, business model and market position in the industry.
"Yum also believes in the overseas market potential of Little Sheep's hot-pot business," he said.
Little Sheep shares resumed trading yesterday, and news of the deal helped the stock surge 24.5 percent to its record close at HK$6.14.
Little Sheep, based in Baotou in the Inner Mongolia Autonomous Region, operates 179 self-owned restaurants and another 274 through franchises on the Chinese mainland, according to its 2010 annual report. Its net income gained 21 percent last year. The company plans to open 40 outlets this year.
Lin Yue, an analyst from Lin Yan Management Consulting, ruled out any concerns over monopoly, saying that Little Sheep still accounted for a small part of China's overall restaurant market.
Yum, the operator of KFC and Pizza Hut fast-food chains, offered to buy Little Sheep shares for HK$6.50 per share in cash, a premium of 30 percent. Little Sheep shares closed at HK$5 on April 21, when trading was halted.
The buyout will give Yum a 93.22 percent stake in the company, leaving the rest to the Hong Kong-based company Possible Way International.
The buyout has to be approved by China's Ministry of Commerce and other regulatory agencies.
If it does get the nod, Zhang Gang will remain the board chairman while Chen Hongkai will continue as company director. Zhang will also be named as founding chairman of Little Sheep.
"Yum's dominating position in the global market will be of great use to Little Sheep's brand awareness and help it gain advanced management expertise," said Liu Ludan, an analyst at Industrial Securities.
"Yum will also benefit from adding a Chinese-style chain into its global portfolio," Liu added.
Yum bought into Little Sheep in 2009 and increased its shareholding to 27.2 percent last year.
"Market competition for China's highly fragmented catering industry has intensified over the past few years," said Samuel Su, chief executive officer of Yum's China division, adding Yum was keen to further improve Little Sheep's brand, business model and market position in the industry.
"Yum also believes in the overseas market potential of Little Sheep's hot-pot business," he said.
Little Sheep shares resumed trading yesterday, and news of the deal helped the stock surge 24.5 percent to its record close at HK$6.14.
Little Sheep, based in Baotou in the Inner Mongolia Autonomous Region, operates 179 self-owned restaurants and another 274 through franchises on the Chinese mainland, according to its 2010 annual report. Its net income gained 21 percent last year. The company plans to open 40 outlets this year.
Lin Yue, an analyst from Lin Yan Management Consulting, ruled out any concerns over monopoly, saying that Little Sheep still accounted for a small part of China's overall restaurant market.
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