Yum Feasts on China, Still Eying Little Sheep 百胜依然觊觎小肥羊

By newsdoug on July 15, 2011

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.

现在在上海依然是早餐时分，所以我想以肯德基和必胜客餐饮连锁店的母公司–百胜餐饮集团<YUM.N>的一则新闻作为一天的开始。百胜刚刚发布2011财年第二季度财报，让我对该财报最感兴趣的一点是，该公司依然有意推进对小肥羊的收购案。财报最底端的注脚部分简单提到了该收购案，百胜向针对收购小肥羊专门开设的托收帐户存入3亿美元。这一收购消息最初是在近三个月前宣布，但很明显，导致该收购案悬而未决的主要障碍是中国反垄断监管部门的审批。尽管该收购案产生的垄断效应近乎为零，但有人担心，中国的监管者或许不愿看到一个有前景的、土生土长的国有品牌被百胜这种外国食品业巨头所吞并，因此会否决该收购案的通过。看我看来，此事出现在财报的底端很可能是向投资者默默传达讯息，告诉他们该公司依然在推进该收购，公司对该案获批持谨慎乐观态度。如果获批，这对百胜肯定是大好事。百胜在全球近三分之一的收入来自中国，今年第二季度在中国的可比店销售增长18%。成功收购小肥羊将不仅给百胜带来中国市场中一个拥有增长潜力的新领域，还将最终扩展至亚洲市场，因为这家公司经营的是采用传统餐厅布置的火锅店，在中国大部分地区和日本、韩国等地区，这种形式深受欢迎。如果成功，也给西方投资者发送了一个重要的信号，那就是中国愿意让他们收购有发展潜力、经营良好的中国企业。

一句话：百胜提到为收购小肥羊开设了一个特别基金，相当於这家公司发出的一个低调的信号，那就是百胜对收购小肥羊感到谨慎乐观。