Yum! Brands, the world's largest restaurant company, made an announcement earlier this week that revealed its proposed plans for Chinese-based Little Sheep hot pot chain. Yum! Brands, the people behind KFC, Pizza Hut, Taco Bell, A&W Restaurants and Long John Silver's, totaling 38,000 restaurants in over 110 countries and territories, look to add one more major restaurant to their impressive portfolio.
Not a random investment opportunity, Yum! has been a significant shareholder in the Little Sheep brand since 2009, currently holding 27.2% of the company's shares. The Yum! brand believes that a stronger partnership will accelerate Little Sheep's development, benefiting from certain flexibility and access to additional growth capital from Yum! at short notice.
In layman's terms, Little Sheep will have the benefit of that Yum! money. The partnership won't be one-sided though. Having entered the Chinese market in 1987, China is now Yum!'s number one market in terms of restaurant development. A recent NY Times report noted that 500 Yum! restaurants opened throughout mainland China alone, generating more than one-third of its annual revenue in the country.
With Yum!'s 6.50 Hong Kong dollar ($0.84) offer for most of the company's shares puts the company's valuation at $682 million. The aim was to raise Yum!'s stake in the company to 63.2 percent, with the remaining percentage going to Little Sheep founders Zhang Gang and Chen Hongkai.
Yum! is currently the global leader in the chicken, pizza and Mexican-style food categories. Time to capture that Chinese Food + Hot Pot swag? Seems like a likely direction for the restaurant giant.