News

Yum China sold for $460M

September 2, 2016

Yum Brands is selling the Chinese arm of its company, Yum China, for $460 million. They buyers are a China-based global private equity firm, Primavera Capital Group and Ant Financial Services Group, an online and mobile financial services provider, according to a company press release from YUM Brands. 

"Primavera and Ant Financial both have deep insights into the rapid urbanization and digital transformation which is driving the evolution of China's economy, and we are excited about their investment into Yum China. The investment is a clear endorsement of our business strategy and growth potential, and their diverse experience and relationships will be extremely beneficial." - Yum China CEO Micky Pant

After the investments finalize on Oct. 31, Yum China begins trading on the New York Stock Exchange as a separate company from Yum Brands the next day, Nov. 1, under the ticker symbol YUMC. 

Under the agreement, Primavera will invest $410 million, and Ant Financial will chip in $50 million. A news release said the final number of shares issued to the two companies is subject to a post-closing adjustment. As a result, the effective price will be discounted 8 percent from the volume-weighted average trading price of Yum China's equity value during the period that begins 31 days, and ends 60 days, after completion of the spin-off.  The news release said that the amount is also subject to a collar mechanism that limits the number of shares issued. 

Primavera and Ant Financial will get two tranches of warrants to acquire shares of common stock in Yum China. Those tranches will reflect 2 percent equity ownership interest in the aggregate in each tranche, which can be used in the five years after the warrants are issued. Strike prices will correlate to equity values of $12 billion and $15 billion, according to the release.

The news release said that Primavera founder and former Goldman Sachs China Chairman Fred Hu will serve as non-executive chair of the Yum China board. 

"Through this collaboration, we aim to help Yum China provide world-class mobile payment services for tens of millions of customers across its brands. These services include hassle-free Alipay for customers to help shorten queues at the cashier, as well as membership solutions for Yum China designed to help manage their customer relations and promotions. Leveraging our Big Data capabilities, KFC and Pizza Hut witnessed promising marketing results through their promotion on multiple Ant Financial platforms. "-Eric Jing, Ant Financial President

"We have long admired the Yum China business and are looking forward to collaborating with the board and management to realize the company's full potential," Hu said in the news release. "Yum China is an established leader in the retail and restaurant industry which we believe is poised for continued strong growth and unit expansion, as cities across China invest in new transportation hubs, shopping malls and other physical and electronic infrastructure that will support consumption. I look forward to leading the Board of Directors of Yum China in its new and exciting chapter as an independent company."

Ant Financial Services Group President Eric Jing added, "Through this collaboration, we aim to help Yum China provide world-class mobile payment services for tens of millions of customers across its brands. These services include hassle-free Alipay for customers to help shorten queues at the cashier, as well as membership solutions for Yum China designed to help manage their customer relations and promotions. Leveraging our Big Data capabilities, KFC and Pizza Hut witnessed promising marketing results through their promotion on multiple Ant Financial platforms. We look forward to further collaborating with Yum China in the future."

Yum China CEO Micky Pant said that he was excited about the investment since Primavera and Ant Financial have deep insights into the rapid urbanization and digital transformation, which is driving the evolution of China's economy.

"The investment is a clear endorsement of our business strategy and growth potential, and their diverse experience and relationships will be extremely beneficial," he said.

"Dr. Hu's extensive market insights and experience scaling businesses in China will be invaluable as we move to expand the footprint of our brands. In addition, Yum China is already the leading restaurant company for cashless payment systems in China, and we expect Ant Financial can provide further unique insights to help us better connect with consumers through mobile technology."

At Yum! Brands state-side, CEO Greg Creed said today's news marks a pivotal moment in the brand's evolving history.

"The investments from Primavera and Ant Financial in Yum China mark another important milestone in our plans to separate the China business and create a solid foundation for Yum China as it prepares to become an independent restaurant powerhouse," he said in the news release. 

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