Yum in talks with KKR, Hopu, to sell stake in China unit: sources

Thu Mar 24, 2016 4:26am EDT
 
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By Saeed Azhar and Elzio Barreto

SINGAPORE/HONG KONG (Reuters) - Yum Brands Inc (YUM.N: Quote), owner of KFC and Pizza Hut, is in talks with private equity firms including KKR & Co LP (KKR.N: Quote) and Hopu Investments to sell a minority stake in its China operations as it prepares to spin off the once booming unit, two sources familiar with the plans said on Thursday.

Several other Chinese investors were also looking into the deal, said the sources, who declined to be named.

The potential investment comes after a difficult few years for Yum in China, its biggest market by sales, where a series of food-safety scandals and management mis-steps has dented its reputation with diners.

The chain plans to spin off its 6,900 restaurants in China, which account for about half of the company's total sales, by the end of 2016. Yum China will list on the New York Stock Exchange, and possibly in Hong Kong.

The China business could be valued at about $10 billion, analysts and bankers estimate, based on its core earnings.

Yum, still the largest fast food chain in China, has been losing ground to McDonald's Corp (MCD.N: Quote) as they both strive to revive flagging sales in the teeth of growing competition from local rivals and a slowing economy.

"We continue to make good progress since we announced the transaction separating Yum and Yum China," a Yum spokesperson said by email. "We will provide updates on the transaction at appropriate times, and we won't comment on rumors or speculation."

Yum's China sales dipped 0.4 percent in 2015, after two flat years, underlining how managers have struggled to repair its reputation since the food safety scares.   Continued...

 
Customers eat lunch at a KFC restaurant in Beijing, July 15, 2015.  REUTERS/Jason Lee