Board of Yum Brands gives green­light to spinoff plan of its China op­er­a­tions

China Daily (USA) - - BUSINESS - By WANG ZHUOQIONG wangzhuo­qiong@ chi­

Yum Brands Inc — the sprawl­ing fast-food em­pire that owns KFC and Pizza Hut — said its board had ap­proved the spinoff of Yum China. Muk­tesh Pant would re­sign as CEO of Yum’s China di­vi­sion on the com­ple­tion of the spinoff.

In other moves, the com­pany said Jonathan Linen would de­part from the group’s board and au­dit com­mit­tee and will be­come a mem­ber of Yum China board. Linen’s res­ig­na­tion from the par­ent com­pany’s board and ap­point­ment to Yum China’s board will be ef­fec­tive on Oct 12.

Yum Brands, which op­er­ates more than 7,200 res­tau­rants in China, also an­nounced an in­crease in the com­pany’s div­i­dend. The lat­est pay­out rep­re­sents an 11 per­cent in­crease on the com­pany’s pre­vi­ous quar­terly div­i­dend of $0.46 per share.

Yum said the spinoff of Yum China was is on track and ex­pected to be com­pleted by Oct 31.

Ear­lier this month, Yum Brands agreed to sell a com­bined stake, which was val­ued at $460 mil­lion in its Chi­nese op­er­a­tions, to Pri­mav­era Cap­i­tal Group and Ant Fi­nan­cial Ser­vices Group, a deal that sets the stage for a spinoff of the busi­ness into a sep­a­rate com­pany next month.

Pri­mav­era, a Chi­nese pri­vate eq­uity firm, will in­vest $410 mil­lion in the spinoff. Ant Fi­nan­cial, an af­fil­i­ate of e-com­merce giant Alibaba Group Hold­ing Ltd, will put $50 mil­lion into the busi­ness.

Pri­mav­era founder FredHu, the for­mer Goldman Sachs Group Inc chair­man in charge of its busi­ness in China, will be­come chair­man of the new com­pany, which will be called YumChina.

Ant Fi­nan­cial op­er­ates the widely used Ali­pay mo­bile-pay­ments plat­form. The firm will as­sist with an elec­tronic pay­ment sys­tem that will work across the restau­rant brands.

Ja­son Yu, gen­eral man­ager of Kan­tar World­panel China, said the in­vest­ment would not bring ma­te­rial change to the day-to-day run­ning of the fast­food chains.

“Western fast-food chains still have more users than any other Chi­nese res­tau­rants and they are also rapidly adapt­ing to the ‘new nor­mal’ by re­form­ing their menus and trans­form­ing their cus­tomer ex­pe­ri­ences,” said Yu.

“There are al­ways dif­fer­ent meal oc­ca­sions that McDon­ald’s and KFC can in­tro­duce de­spite the in­creased level of com­pe­ti­tion,” he said.

“With their strong brand aware­ness and wide cov­er­age, they stand to gain the most from China’s ur­ban­iza­tion — es­pe­cially with more mi­gra­tion to county towns and the ex­ten­sion of city bound­aries— pro­vided they can keep chang­ing to adapt to the evolv­ing con­sumers tastes.”

The fast-food restau­rant op­er­a­tor con­tin­ues to dom­i­nate China’s fast-food space, boast­ing twice as many KFC res­tau­rants as McDon­ald’s and five times as many Pizza Hut out­lets as Papa John’s and Domino’s com­bined. Yum is also con­sid­er­ing test­ing its Taco Bell brand in China.

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