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Yum! acquires Little Sheep, caters to Chinese appetite

2011-11-11 17:00    Ecns.cn     Web Editor: Li Heng
The U.S. food giant Yum! Brands, Inc. was approved to acquire Little Sheep Group Ltd., the Chinese hot pot restaurant chain, on November 7.

The U.S. food giant Yum! Brands, Inc. was approved to acquire Little Sheep Group Ltd., the Chinese hot pot restaurant chain, on November 7.

(Ecns.cn)-- U.S. food giant Yum! Brands, Inc. was approved to acquire Little Sheep Group Ltd., the Chinese hot pot restaurant chain, on November 7, after it had proposed to buy a 93.2 percent stake in the company last April.

Yum!'s application was cleared by China's Ministry of Commerce under the Chinese anti-monopoly law, according to an announcement on November 8 by Little Sheep via the Stock Exchange of Hong Kong Ltd. (SEHK). Little Sheep will inform shareholders of the details and timetable on November 14, a source revealed. Meanwhile, the chain's stock price soared to 6.37 Hong Kong dollars on November 8, up 15.19 percent.

Yum! will purchase a 93.2 percent stake in Little Sheep at a cost of 6.5 Hong Kong dollars per share, while the founders of the restaurant chain, Zhang Gang and Chen Hongkai, will keep 6.8 percent, according to an announcement from Yum!. When the acquisition is finalized, Little Sheep is predicted to terminate its trading on the SEHK.

The acquisition plan still needs to consolidate some of its premises, including supporting votes from the shareholders of Little Sheep, according to Yum!. Once the premises are satisfied, Yum will realize its acquisition plan through one of its wholly-owned subsidiary companies. By then, Yum! will manage all of Little Sheep's business.

Yum! catering to Chinese appetite

Pizza Hut and Kentucky Fried Chicken (KFC) are well-known Yum! brands already currently operating in China. The successful buyout of Little Sheep will no doubt expand the Chinese market for the company and increase its diversity.

"We are pleased that we have received approval from the Ministry of Commerce to proceed with our proposed privatization of Little Sheep restaurants," said Sam Su, chairman and chief executive of Yum! Restaurants China.

"This is another important step in executing our strategy of being 'rooted in China, part of China,'" he said. "We look forward to completing this transaction and are confident we can strengthen the Little Sheep brand and satisfy consumer demand for the hot pot concept."

"For Yum!, its acquisition of China's local food brand will help it access market information of China and make its products and management tailored to China's domestic market," said an anonymous analyst in the food industry during an interview with Sohu. "Seen from Yum!'s first quarter report, Chinese market revenue increased by nearly 28 percent. A good number of foreign enterprises saw its success, and began turning to the Chinese market. This acquisition will consolidate Yum!'s position in China."