Strategy

Chinese Investors Bet $460M on Yum Spinoff

The owner of KFC is partnering with Primavera Capital and an Alibaba affiliate to make Yum China an "independent restaurant powerhouse."
Matthew HellerSeptember 6, 2016

A Chinese investment firm and an affiliate of Alibaba are making a bet on China’s restaurant industry by investing $460 million in the planned spinoff of Yum Brand’s China unit.

Yum, the owner of KFC and Pizza Hut, said Friday that Primavera Capital and Ant Financial Services Group will put $410 million and $50 million, respectively, into Yum China, together receiving between 4.3% and 5.9% of the company.

Yum China will begin trading separately on the New York Stock Exchange in November. The exact stakes of Primavera and Ant will depend on Yum China’s average price during the second month of trading.

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“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,” Yum Brands CEO Greg Creed said in a news release.

Since launching in China in 1987, KFC has grown into the country’s most popular fast-food chain. Despite growing competition and food-safety concerns, Yum China overall generates more than a billion dollars of cash flow annually.

Yum decided to spin off the unit under pressure from activist investors. “Yum’s partnership with Ant Financial, China’s most valuable internet finance company at $60 billion, could help the fast-food chain navigate China’s rapidly changing and highly competitive food-delivery business,” The Wall Street Journal said.

Ant Financial operates Alipay, China’s largest online payments service, and has been expanding into China’s restaurant industry. Alibaba and Ant together acquired food-delivery app Ele.me for $1.25 billion n April.

Ant “plans to incorporate Alipay mobile and point of sale payment services across KFC, Taco Bell and Pizza Hut restaurants, and also help them develop and run consumer loyalty programs and other commerce initiatives,” TechCrunch said.

Primavera was founded by former Goldman Sachs Greater China Chairman Fred Hu. “Primavera and Ant Financial both have deep insights into the rapid urbanization and digital transformation which is driving the evolution of China’s economy,” Yum China CEO Micky Pant said.