Exclusive: CIC ends talks with Yum Brands over China business - sources

Fri May 20, 2016 2:41pm EDT
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By Lauren Hirsch and Greg Roumeliotis

(Reuters) - A consortium that includes sovereign wealth fund China Investment Corp (CIC) and U.S. buyout firm KKR & Co (KKR.N: Quote) has ended discussions to buy a stake in Yum Brands Inc's (YUM.N: Quote) China unit, according to people familiar with the matter.

Louisville, Kentucky-based Yum Brands, owner of the Pizza Hut and KFC fast-food chains, has been looking to spin off its 7,205 China restaurants by the end of 2016, amid pressure from activist investor Corvex Management, whose founder, Keith Meister, is on Yum's board.

One of the main sticking points was the CIC consortium's desire to have majority control in the China business, something Yum would not entertain because of the negative tax implications on proceeds, the people said on Friday.

CIC's consortium also had concerns around achieving the investment returns it desires in a capital-intensive business amid a slowing Chinese economy, the people added, asking not to be identified because the negotiations were confidential.

"Our board is fully committed to maximizing shareholder value, and we are making great progress towards the separation of our China business by year-end and at the same time returning significant capital to our shareholders," a Yum spokeswoman said.

"Our China business is a large, unique and valuable asset ... We're confident that, as a well-capitalized, standalone public company, it will have a long runway for continued growth," she added.

KKR declined to comment, while CIC did not respond to a request for comment.

Separately on Friday, Yum unveiled a $4.2 billion share buyback and declared a quarterly dividend of 46 cents per share. The move follows its previous commitment to return $6.2 billion of capital to shareholders before the planned separation of its China business.   Continued...

A man walks past a logo of KFC, outside a restaurant in Shanghai, China, July 30, 2015.  REUTERS/Aly Song/File Photo