The spinoff is expected to be completed on October 31, with Yum China set to trade on the New York Stock Exchange the following day under the ticker ‘YUMC’.
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Yum Brand shares rose 72 cents to $91.48 in morning trading Friday. The two groups will combine to put in a total of $460 million into the Yum China spinoff.
Primavera’s founder, Fred Hu, the former chairman of Goldman Sachs Greater China, will become non-executive chairman of Yum China’s board.
Primavera and Ant Financial will also receive two tranches of warrants to acquire shares of Yum China’s shares reflecting approximately 2% stake in each tranche to be exercisable in the five-year period following the issuance of those warrants, with strike prices correlating to equity values of US$12 billion and US$15 billion.
Ant, the Alibaba affiliate, operates the widely used Alipay mobile payments platform.
But the company has been pushing toward a spin off following years of sales weakness amid food safety and economic concerns in the country.
Representatives for Primavera and Ant couldn’t be immediately reached for comment after business hours. Those warrants will have a five-year term and could increase the two investors’ ownership to almost 10% if exercised. Brands will become primarily a franchised company while Yum China will be a franchisee.
Yum, still the largest fast-food chain in China, has been losing ground to McDonald’s Corp MCD.N and local rivals in a sluggish economy. Corvex is among Yum Brands’ top holders with a 5.4% stake.
KFC and Pizza Hut’s parent company says it will sell a stake in its China unit ahead of the spinoff later this year.
Chinese e-commerce giant Alibaba, together with its financial affiliate, has carved out a territory in China’s competitive online food-delivery and booking-services market. Its investments include Ant Financial as well as Alibaba Group. Mr. Hu has built ties with a range of China’s most important financial figures and earned a Ph.D in economics from Harvard University.
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Under the agreement, Primavera will invest $410 million, and Ant Financial will chip in $50 million. “These services include hassle-free Alipay for customers to help shorten queues at the cashier as well as membership solutions for Yum China created to help manage their customer relations and promotions”, said Eric Jing, president of Ant Financial Services Group.
