Temasek clears first-round bid for Yum China stake

A Pizza Hut outlet in downtown Shanghai. Yum Brands, which owns Pizza Hut and KFC, aims to spin off its 7,205 China restaurants by the end of this year amid pressure from activist investor Corvex Management.
A Pizza Hut outlet in downtown Shanghai. Yum Brands, which owns Pizza Hut and KFC, aims to spin off its 7,205 China restaurants by the end of this year amid pressure from activist investor Corvex Management.PHOTO: REUTERS

Second round of bidding for 20% of Pizza Hut parent's China unit worth at least $11b due to close by end-May

BEIJING • Singapore's Temasek Holdings and a consortium that includes China Investment Corp (CIC) and KKR and Co have advanced to a second round of bidding for a minority stake in Yum Brands China unit, people familiar with the matter told Reuters.

Another private equity-backed consortium has also moved to the second round, the people said, although its identity could not be immediately confirmed.

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

The second round of bids for the stake of around 20 per cent is due by the end of this month, the people said, declining to be identified disclosing confidential information.

Yum's entire China unit is valued between US$8 billion and US$11 billion (S$11 billion and S$15 billion) , based on its core earnings of about US$1 billion, the people added. Some bidders are keen to buy control of the China business, they added, but noted that Yum is sticking to the minority sale because it is more tax-efficient.

It was not clear if the bidders would pursue a transaction if Yum does not offer a controlling stake, they added.

In the latest quarter, Yum's China sales grew faster than Wall Street estimates, raising hopes that Yum's profit engine is showing signs of stability after battling many quarters of disappointing sales.

Temasek, a major global investor, and KKR declined to comment. China sovereign wealth fund CIC did not immediately respond to a request for comment.

A Yum spokesman said: "We continue to make good progress since we announced the transaction separating Yum and Yum China into powerful, independent, focused companies by the end of 2016."

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 20, 2016, with the headline 'Temasek clears first-round bid for Yum China stake'. Print Edition | Subscribe