LOUISVILLE Ky. Yum! Brands Inc. said Tuesday it would pay $63 million to purchase a 20-percent stake in Little Sheep Group Ltd., a China-based operator of 375 “hot pot” restaurants.
The transaction, expected to close this summer, could extend Yum’s long-term growth prospects in China should the company pursue a controlling stake in Little Sheep, according to securities analyst David Tarantino at Robert W. Baird & Co. Already Yum garners 28 percent of its annual revenue from its operations in China.
Little Sheep, which is based in the Inner Mongolia region, operates restaurant primarily in China as well as Hong Kong, Japan, Canada and the United States. The concept specializes in Mongolian-style hot pot cuisine, which is characterized by its proprietary soup base and Mongolian lamb specialties. Customers cook their own food in soup pots at the table.
Yum’s position in China was solidified with the successes there of its KFC and Pizza Hut brands and the newer East Dawning and Pizza Hut Home Service concepts. The company boasts about 3,000 restaurants in China. In addition to those brands, the Louisville-based company also owns the Taco Bell, A&W and Long John Silver chains. Together, the company operates or franchises more than 36,000 locations worldwide.
“Our strong position in China allows us to identify opportunities for strategic partners such as Little Sheep, a leading concept with strong branding and a nationwide network,” said Sam Su, president of Yum! Restaurants China and vice chairman of Yum Brands. “We look forward to working with Little Sheep as we continue to focus our own management on growing our existing portfolio of brands.
“China remains the biggest growth opportunity in the restaurant industry in the 21st century,” Su added.
Contact Sarah E. Lockyer at [email protected].
