As KFC Recovers in China, Parent Yum China Plans Big Hong Kong Listing -- Update
31 August 2020 - 4:31PM
Dow Jones News
By Joanne Chiu
China's largest restaurant company has begun taking orders for a
Hong Kong share sale that could raise more than $2.5 billion, in
the latest move by a U.S.-listed Chinese company to seek a
secondary listing in Hong Kong.
The offering by Yum China Holdings Inc., which operates KFC and
Pizza Hut in China, reflects how the Chinese economy is moving past
the coronavirus pandemic. As the outbreak peaked in February, Yum
China was forced to close more than a third of its outlets, but it
said in its prospectus nearly all of its restaurants were open as
of end-July, even though sales and profits were still trending
unevenly.
The deal, led by Goldman Sachs, would add to a series of recent
secondary listings in Hong Kong by Chinese companies whose shares
are already traded in New York, such as Alibaba Group Holding Ltd.,
JD.com Inc. and NetEase Inc.
Meanwhile, Ant Group Co., the Chinese technology and
financial-services giant, is bypassing New York and planning
initial public offerings in Hong Kong and Shanghai.
The Hong Kong share sales come as tensions between the U.S. and
China widen to include financial-markets issues.
Yum China will sell about 41.91 million shares and plans for its
stock to start trading in Hong Kong on Sept. 10, a term sheet seen
by The Wall Street Journal showed.
The maximum offer price for the small portion of the deal
reserved for individual investors is 468 Hong Kong dollars
(US$60.37), representing a premium of about 7% to Yum China's
closing price in New York Friday. That price implies a total deal
size of about US$2.5 billion, although the price for institutional
investors might be slightly different.
On the same basis, the final deal size could increase to US$2.9
billion if underwriters exercise an option to sell 15% more shares.
The company will fix the offer price on Sept. 4.
Shares of Yum China have risen since U.S. fast-food operator Yum
Brands Inc. spun it off as a separately listed company in late
2016. Its stock has gained nearly 18% this year, outperforming Yum
Brands and McDonald's Corp.
Yum China in July reported a 26% drop in net income to $132
million in the second quarter, as the pandemic disrupted store
traffic and tourism, with some regions of China suffering outbreaks
of coronavirus infections. Its revenue dropped 11% year-over-year
to $1.9 billion during the quarter.
The company said it plans to use the deal proceeds to expand its
restaurant network and invest in digitization and supply-chain
overhauls, among other things.
Write to Joanne Chiu at joanne.chiu@wsj.com
(END) Dow Jones Newswires
August 31, 2020 02:16 ET (06:16 GMT)
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