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Private Equity eyes Yum! China

US private equity company KKR & Co tops a growing list of potential investors in Yum! China, the fast food giant’s planned spin-off.

Bloomberg has named KKR, Baring Private Equity China and sovereign fund China Investment Corp as potential bidders for cornerstone stakes in the Chinese fast food company which will operate some 9000 franchised restaurants under the KFC, Pizza Hut and Taco Bell brands.

Yum! Currently has 7100 restaurants in Mainland China and plans to open 600 more this year. It has also just announced plans to launch Taco Bell in China.

Yum! Is reportedly planning to retain a controlling stake in the spun-off entity, perhaps limiting the stake sold to 20 per cent. That sized stake could attract an investment of US$2 billion.

Bloomberg also identified Chinese private-equity firm Hopu Investment Management as another potential buyer.

Such investments – still speculative at this stage – may offer Yum! Another means of raising capital without a formal float

Yum! Prevously said it believes that where one united company would have targeted 10 per cent earnings per share growth, each of the two separated companies would achieve a 15 per cent growth rate independently (based on EPS growth and dividend yield).

“We believe this transaction is a classic example of ‘one plus one equaling more than two’ as it will enable each company to realise its full potential and achieve greater value on a standalone basis,” said Greg Creed, Yum! Brands CEO, announcing the spin-off plan last December..

“We continue to make solid progress on our planned separation into two independent, publicly-traded companies… each with compelling growth strategies, distinct investment characteristics, and optimised capital structures,” he said.

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