It’s still breakfast time here in Shanghai, so I’ll start the day with an item on Yum Brands (NYSE: YUM), parent of the KFC and Pizza Hut chains, which continues to feast on a China market hungry for greasy Western fast food. The most interesting item for me on Yum’s earnings announcement is that its deal to buy leading Chinese hot pot chain Little Sheep (previous post) is still alive. The only reference to that deal in Yum’s earnings statement comes in a footnote literally at the very bottom, in which the company says it has placed $300 million in an escrow account specifically for the purpose of buying Little Sheep. That deal was initially announced nearly three months ago, and clearly the main thing still holding it up is approval from Chinese anti-monopoly regulators. While this deal has almost zero monopoly implications, some worry that China’s nationalistic regulator may be reluctant to see a promising home-grown national brand swallowed up by a foreign giant like Yum, and thus veto it. The appearance of this item at the bottom of Yum’s statement, in my view, is likely a quiet message to investors telling them the deal is still alive and the company is cautiously optimistic it will be approved. Such approval would be great news for Yum, which now gets about a third of its global revenue from China and saw its same-store sales in the market grow a healthy 18 percent in the second quarter. (English article) A successful purchase of Little Sheep would give Yum a huge new market segment for growth not only in China but also eventually much of Asia, as the company operates more traditional sit-down restaurants specializing in hot pots, a winter favorite in much of China and countries like Japan and Korea. It would also send an important signal to Western investors that China is prepared to let them buy up healthy Chinese companies with good growth potential.
Bottom line: Yum’s mention of a special fund for its Little Sheep acquisition looks like a low-key sign the company is cautiously optimistic it will complete the deal.
Related postings 相关文章: