Yum hopes investors find its new deal finger-licking good.
Yum Brands, the owner of the Pizza Hut and KFC fast food chains is said to be in talks to sell a controlling interest of its China unit. The investor group includes sovereign wealth fund China Investment Corp (CIC), KKR and Baring Private Equity, Reuters reported.
Valued at $10 billion, Yum’s China unit accounts for about half of the parent company’s total sales, according to analysts. The company has said it hopes to spin off the unit’s 6,900 China restaurants by the end of 2016.
People familiar with the matter did not tell Reuters what price was being discussed. But, when Bloomberg first reported the news it said the deal could value Yum China between $7 billion-$8 billion.
However, the sources said it was unclear whether Yum would agree to sell a majority stake, because disposing of more than 20% of the China business would attract a higher tax bill.
The U.S.-based Yum had initially planned to sell a 20% stake in the China operation ahead of a planned listing on the New York Stock Exchange and possibly in Hong Kong. However, the buyout firms balked because such an arrangement made it hard to get the funding necessary to finance the deal. This forced Yum to rework the deal.
Yum is the largest fast food chain in China, but it’s been losing ground to McDonald’s, growing competition from local rivals and a slowing economy. McDonald’s is said to be bringing in partners as well.
Between 2006 and 2012, the Chinese loved Yum’s restaurants,
driving revenue growth of 30% annually. But in 2013, and 2014 sales were flat and last year China sales dipped 0.4%
CIC, KKR and Baring declined to comment to Reuters.