Rival hot-pot chains plan IPOs to raise HK$3b
China's two largest hot-pot restaurant chain operators are planning to go public as soon as next year to raise about HK$3 billion between them, extending their competition from the dining tables to equity markets.
Little Sheep, arguably the country's most profitable hot-pot restaurant chain, aims to raise up to HK$2 billion in an initial public offering in Hong Kong while smaller rival Little Lamb is poised to raise up to one billion yuan in Shanghai, senior officials say.
Founded in Baotou and using a franchising business model, both Little Sheep and Little Lamb seek to boost their reserves as they fight for a bigger slice of the food and catering market in their home turf and overseas, such as in North America and Japan.
Lu Wenbing, president of Little Sheep's holding company, Inner Mongolia Little Sheep Catering Chain, said: 'The [Hong Kong] listing is planned for next year to give us more time to grow the company's profits and hence its valuation.'
Little Sheep's proposed listing marks its latest attempt after winning a legal fight last year against a another restaurant group in Beijing on intellectual property rights involving the Little Sheep trademark.
Little Sheep also sold about 40 per cent to two buyout funds led by Europe's 3i Group for a combined US$25 million last year.
Last year, market sources suggested Little Sheep planned to go public before next year and raise HK$1 billion. The latest offering target is almost double that amount.
Mr Lu said Little Sheep, established in 1999 or two years before Little Lamb, ran about 300 franchised stores and 100 directly invested outlets across the country after shutting some 300 non-performing franchised stores, he said.
Lei Hong, general manager of Little Lamb's holding company, Xiao Wei Yang Catering Linkage Inner Mongolia, now runs about 610 restaurants of which 47 are directly invested.
'The mainland market is so huge that it has plenty of room for many players,' Mr Lei said.
Little Lamb would increase the number of directly invested outlets to 200 by the end of next year while adding new ones in London, Tokyo and Canada, he said.
Little Lamb, however, would aim at expanding through franchised stores and pick capital cities on the mainland for directly owned stores, Mr Lu said. He did not reveal any figures.
Little Sheep and Little Lamb, which source lamb from local farmers in Inner Mongolia, plan to use part of the listing proceeds to set up their own sheep farms and processing plants. Little Sheep on average sources five million sheep annually.
Mr Lu expects Little Sheep's net profit and sales to grow at an average of 40 per cent annually. Profit was 84 million yuan on about 900 million yuan of sales in the year to March.
Little Lamb posted a 30 million yuan profit on about 200 million yuan sales in the year to December.