Little Sheep announced on the morning of the 8th that the Ministry of Commerce approved the privatization plan on November 7 in accordance with China’s Anti-Monopoly Law. It is reported that after the acquisition is implemented, Yum! will hold over 90% of Little Sheep’s equity.
Since then, Yum has firmly occupied the top spot in China's catering industry, which also means that Yum has taken a big step towards localization in China.
Little Sheep will be delisted after the acquisition
Yum! said that the current privatization plan is still subject to various prerequisites, including obtaining the voting support of Little Sheep shareholders. Once the plan is implemented, Yum will operate and manage Little Sheep's business. By then, Yum! will hold approximately 93.22% of the issued share capital of Little Sheep. Little Sheep founders Zhang Gang and Chen Hongkai will continue to focus on the company's development as shareholders and hold the remaining 6.78% of the shares.
Little Sheep announced in May this year that Yum proposed to privatize the company and repurchase the shares at a consideration of HK$6.50 per share. The shares repurchased accounted for approximately 66.05% of the company’s issued share capital. Public information shows that the total number of shares issued by Little Sheep increased to 1.035 billion shares in July this year. Based on this calculation, the amount involved in this transaction amounted to approximately HK$4.444 billion.
Currently, Yum holds approximately 27.2% of Little Sheep’s equity. According to the agreement, after the acquisition is completed, Little Sheep’s shares will revoke and terminate their listing status on the Hong Kong Stock Exchange and implement delisting. Affected by this news, Little Sheep surged 15.19% yesterday to close at 6.37 yuan, with a turnover of HK$287 million.
Field differentiation does not count as monopoly
In fact, Yum! and Little Sheep have an extraordinary position in China’s catering industry. According to the list of the top 100 Chinese catering companies in 2010 jointly released by the China Cuisine Association, the China Federation of Commerce, and the China National Business Information Center, Yum! and Little Sheep ranked in the top two. Perhaps because of this, the Ministry of Commerce also rarely extended the antitrust review of this acquisition plan - after the second phase review lasted 90 days, the Ministry of Commerce announced on October 25 that this phase of review would be extended for another 60 days. During this period, industry insiders continued to discuss and question the acquisition, believing that the government should think about the development direction of domestic ethnic catering and pay more attention to the development of foreign-funded catering companies in China.
However, some people in the industry believe that these two giants, one is a Western-style fast food and the other is a Chinese hotpot, will not form a monopoly in their respective fields after the acquisition is completed. Moreover, data shows that in 2010, the annual revenue of Little Sheep and Yum was 1.925 billion yuan and more than 33 billion yuan respectively, totaling about 40 billion yuan. In 2010, the total revenue of the domestic catering industry reached 1.76 trillion yuan, so The proportion is not large.
A person in charge of a fast food chain also told the New Express reporter that as far as Little Sheep is concerned, being privatized by Yum may be a good thing. “The sale of most of the equity of Little Sheep may also be due to a lack of growth momentum. After Yum takes the lead, It can make the brand more international."
Yum's "localization" blueprint is beginning to appear
In fact, Yum, which owns KFC, Pizza Hut and other foreign fast food chain brands, has already made great strides in China. "Localization" and once claimed to "change because of China." In the third quarter of this year, Yum's total revenue was US$3.274 billion (20.787 billion yuan), of which Yum China accounted for US$1.6 billion (10.158 billion yuan), accounting for 48.87%, and the US market revenue was only US$873 million. In terms of profits, the Chinese market achieved US$301 million, accounting for 61.68%.
Now, KFC’s core menu has long included “localized” categories such as rice staples, porridge and fried dough sticks. In 2005, it founded a Chinese fast food brand in China - Dongfang Jibai . But as of now, the number of Dongfang Jibai restaurants does not exceed 20, and there are only 2 in Guangzhou. Zhen Kung Fu, which was founded at about the same time, now has more than 400 stores.
The industry believes that "privatizing" Little Sheep is undoubtedly a shortcut to Yum's "localization" strategy. After this acquisition, the number of Yum! Chinese catering stores will increase dramatically. As of 2010, Little Sheep has 480 stores across the country and achieved a net profit of 188 million yuan in 2010.
Jingshi Su, Chairman and CEO of Yum China Division, said, “This is an important step for Yum Group to implement its overall strategy of ‘based on China and integrating into life’.
We look forward to the successful completion of this transaction and are confident in further enhancing the brand influence of Little Sheep and meeting the needs of consumers for the hot pot concept. ”
The history of Yum’s privatization of Little Sheep
On May 13, Yum and Little Sheep reached an agreement on the acquisition;
On May 14, Yum wanted to acquire Little Sheep at a premium of 30% , stimulated by the news, Little Sheep resumed trading and opened 27% higher;
On June 3, the Ministry of Commerce stated that it had received an antitrust review application submitted by Yum and it was in the filing stage;
October On the 26th, the Ministry of Commerce issued Article 26, Paragraph 1, of the China Anti-Monopoly Law, extending the antitrust declaration review period by 60 calendar days, which will expire on December 24, 2011;
On November 7, the Ministry of Commerce Approved Yum's plan to privatize Little Sheep
Yum turned Little Sheep into "American Sheep" and Little Sheep will be delisted after the acquisition
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