Little Sheep Left Waiting at Regulator’s Door 小肥羊仍在监管机构大门外苦等
More than half a year after announcing its plan to purchase top Chinese hot pot chain Little Sheep (HKEx: 968), Yum Brands (NYSE: YUM), owner of the KFC and Pizza Hut chains, has learned it will have to wait just a bit longer for the anti-monopoly regulator’s decision on the deal — an potentially ominous sign for a regulator that has shown a past tendency to consider nationalistic elements alongside commercial ones in such deals. But at the end of the day, the fact that the regulator hasn’t vetoed this deal yet indicates some debate is probably taking place in the organization, and I still think the chances of an approval are greater than 50 percent, especially as China tries to show its commitment to fair trade in light of US Congress legislation that would punish Beijing for manipulating its currency. According to a new statement filed by Little Sheep to the Hong Kong Stock Exchange, the initial 30 day period for China’s Commerce Ministry to consider Yum’s purchase, worth some $500 million, ended on July 27. (company announcement) The ministry elected to extend that period by another 60 days, which again ended on September 27. Still lacking a final determination, the regulator again exercised its final option for another 60 day extension, meaning a final decision should come by late November. So what does all of this mean? Shareholders clearly don’t think it bodes well, bidding down Little Sheep stock by 12 percent to HK$5.39, or 17 percent below Yum’s offer price of HK$6.50 after the announcement. From a monopolistic standpoint, Yum is clearly China’s largest restaurant operator and would add to that position, but only slightly, by buying Little Sheep. But based on past behavior, I suspect nationalistic concerns are more at play here, as Little Sheep is China’s biggest hot pot chain and a promising home grown brand. Still, I think that at the end of the day fair trade advocates at the Commerce Ministry will win out to their nationalistic peers in this decision, as China seeks to show the world it is willing to play by global rules, and we should see an approval of this deal just before the late November deadline.
Bottom line: Delays in government clearance for Yum’s pending purchase of Little Sheep indicate internal debate at the anti-monopoly regulator, but the deal should finally get a green light next month as China tries to show its commitment to fair trade.
Related postings 相关文章:
◙ Yum China: Little Sheep Getting Tangled in Trade Friction? 百盛收购小肥羊案卷入中美贸易摩擦？
◙ Yum Feasts on China, Still Eying Little Sheep 百胜依然觊觎小肥羊
◙ China’s Heavy Hand Leaves Investors Wary on YUM’s Little Sheep Buy 百胜难吞小肥羊
