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  1. #1
    Senior Member JohnDoe2's Avatar
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    China approves Yum Band's $860 MILLION Deal

    NOVEMBER 8, 2011, 1:10 P.M. ET.

    Yum's Proposed Little Sheep Takeover Approved

    By POLLY HUI And LAURIE BURKITT

    HONG KONG—Seven months after the deal was announced, China's antitrust regulators approved Yum Brands Inc.'s plan to buy hot-pot restaurant operator Little Sheep Group Ltd., in what would be one of the first successful foreign takeovers of a major Chinese brand.

    U.S.-based Yum announced plans in April to take Hong Kong-listed Little Sheep private in a deal that valued the Chinese company at more than US $860 million. While it still awaits shareholder approval, the transaction obtained clearance from the Ministry of Commerce under the nation's antimonopoly laws on Monday. Buying Little Sheep, in which Yum already owns nearly 30%, will boost Yum's China presence, currently dominated by Pizza Hut and Kentucky Fried Chicken franchises, in one of its biggest growth markets.

    The clearance comes amid investor worries that the deal would go the way of other major takeovers of Chinese brands and fail the antitrust review, a process that gives China's government wide latitude to block mergers and buyouts. Regulators rejected outright a bid by Coca-Cola Co. to buy juice maker Huiyuan Juice Group Ltd. in 2009, saying such an acquisition would crowd out smaller rivals, even though the two companies combined held just 20% of China's juice market.

    Yum, of Louisville, Ky., likely gained approval because Little Sheep doesn't dominate China's restaurant landscape, said Wendy Wan, a partner at law firm Faegre & Benson LLP in Shanghai. "Little Sheep is a big name, but it's still a very small part of the market," Ms. Wan said.

    The Little Sheep deal underlines the differences in the scale and nature of acquisitions by Chinese and Western buyers, as mainland state-owned companies dominate outbound activity with purchases of resource assets.

    A consortium of five state-owned Chinese companies, including Citic Group, bought a 15% stake in the world's largest niobium producer, Brazil's Cia. Brasileira de Metalurgia e Mineracao, for US$1.95 billion in September, highlighting the race among steelmakers to secure resources amid tightening supply. That deal has been completed, according to Dealogic. Chinese chemicals company China National Bluestar's US$2.2 billion acquisition of Norwegian silicon producer Elkem also has been cleared by regulators.

    A significant test of Chinese sentiment toward foreign acquisitions will come in December, when the ministry is expected to make a decision on Swiss food group Nestlé SA's US$1.7 billion offer for Chinese candy maker Hsu Fu Chi International Ltd. If completed, the acquisition would be one of the largest foreign takeovers of a Chinese company and would give Nestlé control of the second-biggest confectionery company in China, after Mars Inc.

    Regulators have signaled through previous deals that the closer foreign companies come to the retail sector, the more difficulties they will have in acquiring Chinese companies, said Frank Schoneveld, a Shanghai-based partner at law firm McDermott Will & Emery. "There's a desire to prevent public perception that foreigners are taking over in China," Mr. Schoneveld said.

    In September, the Ministry of Commerce approved Nestlé's bid for a 60% stake in China's Yinlu Foods Group Co., a privately owned drink and porridge maker. In June, regulators passed liquor giant Diageo PLC's takeover of a top white-spirit maker, though approval came about 16 months after the deal was first announced.

    Concerns about a rejection of the Little Sheep deal by regulators mounted in recent weeks, especially after the country's commerce ministry twice extended the period of the takeover review. Between June 27—when the proposal was first submitted to the regulators—and Monday, Little Sheep shares fell 11%, reaching a closing low of 5.05 Hong Kong dollars (65 U.S. cents) on Oct. 31, or a 22% discount to the HK$6.50 per share price Yum is paying for it. Shares in Little Sheep closed up 15% at HK$6.37 in Hong Kong on Monday.

    Little Sheep restaurants specialize in Mongolian hot pot, in which diners dip raw meat and vegetables into shared cauldrons of bubbling broth, a favorite for many in China particularly during the colder months. Little Sheep had 458 owned or franchised restaurants across China at the end of 2010, and 22 additional outlets overseas.

    The company is one of China's largest hot-pot chains. Rival Xiabu Xiabu Catering Management Co. runs more than 200 outlets and plans to expand to 1,000 by 2016.

    China's restaurant industry has been open to foreign investment and takeovers, according to Torsten Stocker, a partner at U.S. strategy-consulting firm Monitor Group, pointing to Philippine fast-food giant Jollibee Co., which entered the Chinese market in 2004 by buying 85% of fast-food noodle chain Yonghe King for $22.5 million. Jollibee acquired the remainder of Yonghe in 2007.

    For Yum, the acquisition will allow the fast-food giant to diversify into the full-service Chinese restaurant segment. Yum built one of the most successful operations of any foreign company operating in China, with nearly 4,000 restaurants that include the KFC and Pizza Hut chains.

    Yum, which bought a 20% stake in Little Sheep in 2009 and increased that to 27.2% last year, said the acquisition remains subject to shareholders' approval at Little Sheep. Completion of the transaction will see the U.S. company's stake in Little Sheep rise to 93.2%. The remaining 6.8% will be held by Little Sheep founders, including Chairman Zhang Gang.

    Yum's acquisition of Little Sheep, once completed, would be one of the first successful takeovers of a major Chinese brand in an opaque domestic regulatory environment over mergers and acquisitions.

    "While the introduction of the Chinese antimonopoly law has not resulted in many transactions being blocked, it has caused delays to many transactions, and there have been instances where the authorities have required certain conditions to be met before approval was given," said Richard Kim, Shanghai-based corporate partner at law firm Allen & Overy, referring to a 2008 law that gave the Ministry of Commerce authority to screen all mergers for antitrust implications.

    Write to Polly Hui at polly.hui@dowjones.com

    http://online.wsj.com/article/SB1000142 ... Collection
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  2. #2
    Senior Member JohnDoe2's Avatar
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    From Wikipedia

    Yum! Brands, Inc.

    Yum! Brands, Inc. (NYSE: YUM) or Yum! is a United States-based Fortune 500 corporation. Yum! operates or licenses Taco Bell, KFC, Pizza Hut, and WingStreet restaurants worldwide.

    Based in Louisville, Kentucky, it is the world's largest fast food restaurant company in terms of system units—nearly 38,000 restaurants around the world in more than 110 countries and territories.[1] In 2010, Yum!'s global sales totaled more than US$11 billion.

    http://en.wikipedia.org/wiki/Yum!_Brands
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