Private equity firms eye China Yum operation

KKR and Baring Private Equity Asia are said to be among the firms interested in bidding for a stake in the company that could lead to a full spin-out.

Pizza Hut and KFC-owner Yum Brands may sell a 19.9 percent stake in its Chinese operation with the ultimate aim of engineering a private equity-led spin-off, according to the Wall Street Journal.

The paper says KKR, Baring Private Equity Asia and “several Chinese funds” have shown an interest in a deal valuing the business at $10 million. A KKR spokeswoman told Agri Investor the firm could not comment.

Yum first indicated it wanted to sell off its Chinese arm last year, given a market slowdown after years of face growth. Yum was the first western fast food company to enter the country in the late 1980s. Its 5,000 KFC branches are recognisable throughout urban China, with outlets in remoter cities like Xinjiang and even some villages.

However, food safety scares and increasing health awareness also make the business riskier than it once was.

KKR China-based portfolio companies include COFCO Meat, Asia Dairy, VATS Liquor Chain Store and the Yuehai Feed Group.

KKR set up a new management structure in 2014 to increase its exposure to Asia, and typically invests from $100 million to $500 million per company in Asia, according to PEI Research & Analytics. In January 2016, China Orient Asset Management (COMAI), China Orient Summit Capital and KKR partnered to form a strategic deal-sourcing platform.

BaringPrivate Equity Asia is focused on investing energy, in media, financial services, consumer and industrial sectors, and has raised $2 billion since January 2005. Its Baring Asia Private Equity Fund VI reached final close on $3.98 billion last year.