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Report: China wants to buy Yum China

China Investment Corp. wants to buy a majority stake in Yum! Brands' China business

Yum China could become a Chinese company — literally.

According to Bloomberg, China Investment Corp., a sovereign wealth fund that manages the country’s foreign exchange reserves, wants to buy as much as 100 percent of Yum! Brands in China.

“We continue to make good progress since we announced the transaction separating Yum and Yum China into two powerful, independent, focused growth companies. We will provide updates on the transaction at appropriate times and we won’t comment on rumors or speculation,” a company spokesman told NRN by email.

The deal could value Yum China at as much as $7 billion to $8 billion, the report said. It would also put the more than 7,000 primarily KFC and Pizza Hut restaurants in the country into the hands of a domestic entity.

Yum Brands is working on a spinoff of its China operations. Yum China would then be a franchisee of Yum Brands.

But Yum reportedly has started talking with investors about selling a stake in the China business to avoid taxes on the deal and inject some China know-how into the operation.

China has been good for Yum, overall. System sales in that country surged by 35 percent in 2011, and 23 percent in 2012, but a pair of food-safety scares hurt business at KFC — the largest restaurant chain in China. Revenue in the country last year were $6.9 billion, the same as in 2013.

Yum had 7,176 locations in China as of the end of 2015, or 17 percent of its more than 42,000 global operations. But because the restaurants in China are company owned, more than half of the company’s revenues come from that country.

By spinning off that business, Yum would be less dependent on those revenues and could focus more exclusively on franchising — outside of China, the company is more than 95 percent franchise owned.

Yum’s stock was down less than 1 percent in late afternoon trading Tuesday.

Update: April 19, 2016 This story has been updated to include a statement from Yum! Brands.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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