Yum! Brands, the operator of KFC, Pizza Hut and Taco Bell restaurants, has stepped up efforts to reach a wider mainland audience by buying hotpot chain Little Sheep Group.
The United States fast-food company plans to spend HK$4.4 billion to increase its holding in Little Sheep to 93.2 per cent from 27.2 per cent and take the Hong Kong-listed company private. It is offering HK$6.50 per share in a deal that values the hotpot chain at HK$6.7 billion.
'Yum! will help Little Sheep explore the untapped breakfast and lunch markets,' said Nicolas Wang, an analyst with Daiwa Capital Markets. 'Hotpot food, unlike traditional Chinese food, doesn't involve complicated cuisine. It is easy for Yum! to understand and manage Little Sheep.'
The buyout will need the approval of shareholders and the mainland government.
Little Sheep shares closed at HK$5 on April 21, the last trading day before Yum!'s takeover bid was officially unveiled yesterday. The stock yesterday rose 24.5 per cent to HK$6.14.
Some analysts have raised concern about the buyout. 'An office table can be moved from the east to west, but a different management style won't be easily imported,' said Jing Linbo, a professor at the Chinese Academy of Social Sciences. 'But the two companies seem prepared for potential frictions since they have spent a long time on the deal.'
