Bloomberg is reporting that Yum! Brands has delayed selling off a minority ownership in its new China company by several weeks after potential investors intentionally missed a deadline for bids.
Louisville-based Yum is in the process of spinning off its China division into a separate company called Yum! China Holding, which will have its own executive leadership and ticker symbol on the stock market. The move divides the stable Yum from the rapidly growing but volatile Chinese market.
The companies are expected to complete the separation on Oct. 31, as previously reported by Insider Louisville.
“I really think this is an opportunity for us to transform new Yum. It’s not just simply we spun off the China business, and life goes on,” Yum CEO Greg Creed said earlier this month.
Yum China Holding plans to open 600 new stores in the country this year, including its first Taco Bell. Yum already operates more than 7,200 KFC and Pizza Hut locations in China.
As part of the spin-off, Yum is looking to sell some ownership stake in Yum! China Holding. Bids from potential investors were due this month, Bloomberg reported, but possible suitors including Singapore state investment company Temasek Holdings Pte, Chinese private equity firm Primavera Capital Ltd., and Hong Kong-based private equity firm PAG Asia Capital missed the deadline.
A source told Bloomberg that potential bidders held back after Yum tried to change the terms of the investment. Under the new terms, Yum would not pay royalties on products developed by Yum! China Holding and would not cover any advertising costs for the company.
Multiple sources also said that companies thought Yum overvalued Yum China at $10 billion. Food scandals over tainted meat in China have hurt Yum, although the company’s sales have started to recover.
“Yum thinks they’re better than they are. They used to be one of the best-managed brands in China,” Shaun Rein, managing director of Shanghai-based China Market Research Group, told Bloomberg.
Yum plans to grant exclusive negotiating rights to one company to purchase a stake in Yum! China Holding.
Investor group China Investment Corp. previously looked to buy stake in Yum but withdrew its offer after finding that increasing competition was impacting the company’s profit margins. A source told Bloomberg that the group independently valued Yum! China Holding at roughly $8 billion — $2 billion less than Yum’s own estimate.