Regulators review Yum Brands, Little Sheep tie-up

China’s anti-monopoly regulator has extended its review of Yum Brands’ (YUM.NYSE) US$573 million takeover bid for Little Sheep (0968.HKG), a rapidly-growing chain of Mongolian hot-pot restaurants, Bloomberg reported. Little Sheep’s stock fell on the news, through analysts believe regulators are unlikely to ultimately block the deal under anti-monopoly regulations, as independent eateries would still account for 90% of restaurant sales in the country. If the deal closes in March, it would realize a 69% return for investors based on last week’s closing price of HK$5.30, said analysts. This would be the largest acquisition by Yum, the Louisville, Kentucky-based owner of KFC, which generates more sales in China than in the US. The company is keen to add Chinese food to its chain offerings, and Little Sheep has seen sales growth of more than 20% each year since 2006. The Ministry of Commerce has reviewed 267 mergers in the past three years and rejected only one. “On a pure business level, there’s no reason to reject it,” said James McGregor, senior counselor in China for APCO Worldwide. Still, “the government is worried about getting criticized for allowing foreigners to buy into Chinese brands. We never know what the politics are behind this.”