Yum to sell stake in China business ahead of spinoff
By Michael Flaherty
(Reuters) - KFC and Pizza Hut owner Yum Brands Inc (YUM.N: Quote) said Chinese investment firm Primavera Capital and an affiliate of Alibaba Group Holding Ltd (BABA.N: Quote) will buy a stake in Yum China for $460 million as Yum prepares to spin off the business.
The deal gives Primavera, a powerful China-focused private equity firm founded by an ex-Goldman Sachs banker, a significant stake in Yum's China business. It also further expands the reach of Ant Financial, which runs Alibaba's Alipay mobile payments platform and has been expanding into China's restaurant industry.
The investors will receive warrants to buy an additional 4 percent stake in Yum China in two tranches at valuations of $12 billion and $15 billion, the company said on Friday.
A Yum spokesman said the use of the proceeds from the deal will be determined by the future Yum China board of directors.
Yum has signaled that part of the money could go toward expanding across China, as the company signaled last October that it hoped to nearly triple the amount of its restaurants in China to 20,000.
KFC and Pizza Hut brands reaped the rewards of catering to China's booming economy, with patrons flooding the restaurants that offered fast Western food, a higher level of service and perceived food safety.
But Yum's China business has hit road blocks in recent years, including a scandal at a minor meat supplier and bird flu outbreaks.