Yum makes formal bid to buy Chinese hot pot chain

Yum Brands (YUM.NYSE) has made a formal offer to buy Little Sheep Group (968.HK) in a deal that values the Chinese hot pot chain at more than US$860 million, the Wall Street Journal reported. Yum and Little Sheep said in a joint statement on Friday that the offer to Little Sheep shareholders would be HK$6.50 (US$0.84) in cash per share – a 30% premium over its April 21 closing share price of HK$5.00 – to increase Yum’s stake in the company to 93.2% from 27.2%. Yum would pay US$570.5-586.3 million for the additional two-thirds stake. The US fast food chain has nearly 4,000 KFC, Pizza Hut and other restaurant outlets in China – accounting for 37% of the company’s US$2.4 billion global revenue in the quarter ended March 19. At the end of 2010, Little Sheep had 458 directly owned or franchised restaurants across China and another 22 outlets overseas.