The following press releases and news reports about China companies were carried on August 31. To view a full article or story, click on the link next to the headline.
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China’s Big Banks Set for Hard Slog as Margins Shrink (English article)
Midea (Shenzhen: 000333) H1 Profit up 13 Pct, Gets US Clearance for Kuka Buy (Chinese article)
Bottom line: McDonald’s is likely to choose a buyer for its China stores in the next 2 months, while China Foods’ decision to sell its stakes in several Coca-Cola bottling plants is probably a simple business decision that reflects changing priorities.
McDonald’s near a sale of China stores
Two western consumer giants are in the headlines of China’s rapidly shifting corporate landscape, led by word that the list of bidders vying to buy McDonald’s (NYSE: MCD) 1,650 China restaurants has been narrowed to 2. The other headline has one of Coca-Cola’s (NYSE: KO) top China business partners, China Foods (HKEx: 506), announcing its intent to dump its stake in several local bottling joint ventures.
Each of these stories illustrates the vital role that local partners play in the operations of foreign companies doing business in China. McDonald’s has largely owned and operated its thousands of China stores independently since entering the market in the early 1990s. But it wants to find one or more local partners to take over those operations as it moves to a more franchise-style model. Coca-Cola also uses a franchise model for the companies that bottle its trademark drinks that include Coke, as well as Sprite and many others. Read Full Post…
Bottom line: Sanpower’s bid to become McDonald’s main China franchise partner looks like a long-shot, and China Resources or Beijing Capital Agribusiness are the most likely to emerge as winners in a deal valued at $2-$3 billion.
Sanpower eyes McDonald’s
What does global fast-food giant McDonald’s (NYSE: MCD) have in common with niche retailers Brookstone of the US and Britain’s House of Fraser? The answer: All 3 could soon become linked through Chinese conglomerate SanpowerGroup, while already owns the 2 niche retailers and is now making a much bigger bid for most of the McDonald’s stores in China and Hong Kong. Sanpower is the latest company to enter the bidding for the China McDonald’s stores, which are being sold as the US fast food giant moves to a franchise model in the market to replace its previous approach of self-owned stores. Read Full Post…
Bottom line: McDonald’s is likely to reach a final deal to sell its China-owned stores by the end of summer, while Cheesecake Factory is likely to enjoy modest success as it launches its first China stores.
Cheesecake Factory comes to Shanghai
A couple of restaurant stories are in the headlines today, one featuring fast-food veteran McDonald’s (NYSE: MCD) as it seeks a new China partner, and the other starring the popular US Cheesecake Factory (Nasdaq: CAKE) chain as it prepares to open its first China restaurant. The McDonald’s story is clearly the larger of the stories, and focuses on a drive to shed direct ownership of its China stores and move to a franchise-based model that has underpinned its success in the west. Meantime, I have to admit that one of my main reasons for writing about Cheesecake Factory is that I used to be a big fan of the chain, though the remote location of its first China restaurant means I probably won’t dine there. Read Full Post…
Bottom line: CIC’s withdrawal from the bidding for a stake in Yum’s China unit represents a minor setback, but Yum’s long history in the market makes finding major local investor less important.
CIC ends bid for Yum China stake
KFC parent Yum Brands (NYSE: YUM) has lost a major potential ally as it prepares to spin off its China business, with word that China’s sovereign wealth fund has dropped out of the bidding for 20 percent of the unit. Reuters is reporting that China Investment Corp (CIC) abandoned its bid for a number of reasons, including Yum’s refusal to sell a controlling stake to the new investor group. Yum has previously said it wants to sell just 20 percent of the China unit, which includes 7,200 stores. It also plans to sell more of the unit’s shares through an IPO later this year in Hong Kong or New York. Read Full Post…
The following press releases and news reports about China companies were carried on May 20. To view a full article or story, click on the link next to the headline.
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Temasek, CIC-KKR Advance to 2nd Round of Yum (NYSE: YUM) China Stake Sale (English article)
BT (London: BT) Applies for Telecoms Value Added Service License In Shanghai FTZ (Chinese aticle)
Bottom line: Yum may sell control of its China unit to Chinese partners in a bid to become more local, while ZTE’s plans for a Nubia IPO reflect a growing emphasis on its younger, trendier smartphone brand.
China set to take control of local KFC?
A couple of big IPO stories are rippling through the headlines, led by word that an investor group headed by China’s sovereign wealth fund could buy control of the China unit of Yum Brands (NYSE: YUM), owner of the KFC fast-food chain, as it gets set for a spin-off and separate listing. This particular news marks a shift from previous reports that implied Yum would retain control of its China unit, even as it sold a major stake to big institutional investors.
While the Yum listing is likely to come later this year, another smaller but interesting deal has telecoms giant ZTE (HKEx: 763; Shenzhen: 00063) saying it plans to spin off and separately list its smartphone division that manufactures under the Nubia brand in the next 3 years. That hints that ZTE may be re-thinking its smartphone business, and perhaps preparing to slowly de-emphasize its older ZTE-branded phones in favor of its younger, higher-end Nubia line. Read Full Post…
Bottom line: Fresh food sellers Yiguo and FruitDay could see strong growth and go public in the next 2-3 years, banking on strong partnerships with Alibaba and JD.com and growing consumer willingness to buy groceries online.
Yiguo in big new funding
Fresh fruit and other grocery items are the latest hot ticket in China e-commerce, with 2 up-and-coming players receiving big new fundings of $100 million or more. The larger of the pair has e-commerce leader Alibaba (NYSE: BABA) and global private equity giant KKR helping online fresh food seller Yiguo raise about $260 million in new money. The other has an online fruit specialist called FruitDay, whose backers include Alibaba arch-rival JD.com (Nasdaq: JD), raising its own $100 million.
This particular trend is really a sub-trend of a broader movement by China’s e-commerce giants into the grocery business over the last few years, encroaching on traditional supermarkets and also Wal-Mart’s (NYSE: WMT) Yihaodian that found early success in the space. Even Amazon (Nasdaq: AMZN) China has gotten into the business, though many of these companies specialize in more traditional packaged foods rather than fresh products. Read Full Post…
The following press releases and news reports about China companies were carried on March 30. To view a full article or story, click on the link next to the headline.
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Anbang Wouldn’t Cross 15 Pct Offshore Investment Cap with Starwood Buy – Source (Chinese article)
Online Fresh Food Retailer Yiguo Gets $240-$280 Series C Funding from Alibaba, KKR (Chinese article)
China Said to Consider Cutting Subsidies for Electric Vehicles (English article)
Bottom line: Yum’s China unit is getting a relatively low value due to the country’s unique risks and slowing economy, while YTO’s backdoor listing is likely to get a cool reception due to intense competition in China’s parcel delivery sector.
Yum seeks investors for China unit
Two major IPOs are in the headlines today, one from the more mature fast-food business and the other from the fast-growing but extremely competitive package delivery sector. The first deal has Yum Brands (NYSE: YUM) in talks to sell up to 20 percent of its China division to private equity investors, as it tries to value the unit in the run-up to a highly anticipated IPO. The second has Alibaba-backed (NYSE: BABA) parcel delivery service YTO Express launching a backdoor listing in Shanghai, as it looks for cash to support its operations that are probably losing big money.
Chinese IPOs have gotten off to a slow start this year, both in China and overseas, for a number of reasons. Beijing has banned new domestic offerings for now, in a bid to stabilize markets after a massive sell-off at the beginning of the year. New US listings have also been slow, as many start-ups that previously would have chosen New York now consider listing at home instead. Hong Kong has been the only area with significant new activity, though even there the volatility in China have also depressed the market. Read Full Post…
Bottom line: Fosun International looks like a good stock pick for the next year due to strong profit growth, as long as founder Guo Guangchang can steer clear of China’s 2-year-old anti-corruption campaign.
Fosun’s Guo is company’s biggest asset, risk
Today marks the launch of a new series on some of my favorite Chinese companies, as I aim to spotlight a group of US, Hong Kong and China-listed names that look set for the best growth over the next 5 years. I’m kicking off the series with fast-rising private equity giant Fosun International (HKEx: 656) because it happens to be in the news, with word the company has launched a fledgling share buyback to support its struggling stock.
In many ways, Fosun encapsulates both the big potential benefits and also the major risks facing many private Chinese companies as they seek to become big players both at home and abroad. Fosun is actually part of a much larger group based in China’s commercial capital of Shanghai, and its private equity arm has been one of the most successful ventures of its savvy founder Guo Guangchang. Read Full Post…
