Investment firms explore buyout of Yum China
HONG KONG: Investment firms are exploring a buyout of Yum China Holdings Inc in what could be one of Asia’s biggest M&A deals this year, sources close to the situation told Reuters.
Yum China, which had a market cap of US$ 13 billion as of its closing price on Monday, was spun off from the KFC and Pizza Hut owner Yum Brands! Inc in 2016 and later listed on the New York Stock Exchange.
The firm itsel f has been discussing internally about switching to the Hong Kong bourse for a listing, because of the city’s proximity to the Chinese market, potentially higher valuat ion and its convenient timezone for executives, a separate source with knowledge of the plan told Reuters.
Chinese investment firm Hillhouse Capital Group is planning to lead a consortium to buy the KFC and Pizza Hut operator in China, said four of the people. The firm, which has received commitments of over US$ 10 billion for a new fund, has tapped lenders for potential financing of the deal and other investors to join them in the bid, two of them said.
Global investment house KKR and Co and Hong Kongbased regional firm Baring Private equity Asia are also weighing up investing in the buyout, according to two sources, who added that no final decision has been made.
Bloomberg first reported on investors in the Yum China buyout on Tuesday. The report said Chinese sovereign fund China Investment Corp ( CIC) and DCP Capital, the investment firm run by former KKR and Co senior executives, are part of the Hillhouse consortium, adding that Primavera Capital Group, a current investor in Yum China, could also join the bidding group.
Reuters could not independently verify if the investors are all working as one bidding group. A separate source with knowledge of the situation said there could be more than one consortium of bidders.
A spokesman for Yum China said the company does not comment on market rumors or speculation when asked about the buyout intent and the Hong Kong listing plan. Yum Brands did not immediately respond to a request for comment.
Hi l lhouse and Bar ing declined to comment. KKR, CIC, DCP and Primavera did not immediately respond to requests for comments.
Chinese investment firm Primavera Capital and Ant Financial Services Group bought a minority stake in Yum China for US$ 460 million as part of the spin- off deal in September 2016. Both are still shareholders in the company. Ant declined to comment.
Two sources said a KKR-led consortium, which included Baring, CIC and Chinese investment firm Hopu Investments, had discussions with Yum Brands! about taking a controlling stake in its China business two years ago but failed to get a deal done.
Yum China shares are down 15 per cent this year but its Monday’s closing price - US$ 34.22 per share, is still above its listing price at US$ 24.51 on November 1, 2016. It has lost about US$ 1 billion in market cap since reports about the potential buyout first came out in late July. — Reuters