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Yum! Brands adds Little Sheep

YUM! Brands Inc said yesterday it has agreed to buy 20 percent in China's leading hotpot restaurant chain, Little Sheep Group, for US$63 million in a bid to boost revenue.

Yum! Brands, the parent of KFC and Pizza Hut, plans to buy a combined 13.92 percent stake from two private equity firms, the 3i Group Plc and Prax Capital Fund I LP, which jointly invested in Little Sheep in a US$25-million deal in 2006. It will buy the stake at HK$2.40 (32 US cents) per share, an 8.4 percent discount to its closing price of HK$2.62 on Tuesday. It will buy the remaining 6.08 percent from Little Sheep's other stakeholders.

The transaction is subject to regulatory and other approvals and is expected to be completed by the summer.

Shares of Little Sheep gained 13.7 percent to HK$2.98 yesterday.

"China remains the biggest growth opportunity in the restaurant industry in the 21st century," said Sam Su, president of Yum! Restaurants China and vice chairman of Yum! Brands Inc.

Yum! Brands' interest in Little Sheep is due to promising prospects for the hotpot restaurant market as well as high profit returns, according to industry sources.

Cooperating with Yum! Brands will help Little Sheep reach its goal to expand internationally, the sources added.

Louisville, Kentucky-based Yum! Brands is the biggest foreign restaurant chain in China with 2,300 KFC and 400 Pizza Hut stores.

Little Sheep operated 375 restaurants on Chinese mainland, Hong Kong, the United States and Japan by the end of last year, according to research company Euromonitor International.


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