Yum China Seeks $2.5 Billion From Hong Kong Share Sale

(Bloomberg) — Yum China Holdings Inc. is seeking to raise as much as HK$19.6 billion ($2.5 billion) from a secondary listing in Hong Kong, adding to the list of mega stock offerings in the Asian financial hub.

The company, China’s largest restaurant operator, plans to sell 41.91 million shares in the offering, it said Friday in a U.S. regulatory filing. The portion of the deal being marketed to Hong Kong retail investors will be priced at a maximum of HK$468 per share, according to the filing.

The top-end price represents a 9.4% premium over Yum China’s closing price Thursday in New York. Yum China, which operates KFC and Pizza Hut in the world’s most populous country, received approval from the Hong Kong stock exchange for the proposed listing, people with knowledge of the matter said earlier.

Yum China would join a growing slate of companies aiming for a trading foothold in Hong Kong as relations between the U.S. and China come under significant strain. U.S. regulators are threatening to restrict Chinese companies’ access to American capital markets if they do not allow authorities to review their audits.

Hong Kong is riding a wave of investor enthusiasm, which encompasses secondary listings as well as debuts such as the planned initial public offering by China bottled water giant Nongfu Spring Co. The company plans to price its IPO in the city at the top of its marketed range, people familiar with the matter said.

The restaurant company plans to use about 45% of the proceeds to expand its restaurant network, according to the filing. Another 45% will be earmarked for spending on technology systems, supply chain and food innovation as well as investments in “high-quality assets” and brands that can bring growth opportunities, it said. The remainder will go toward working capital and general corporate purposes.

Yum China plans to set the final price around Sept. 4, the filing shows. Goldman Sachs Group Inc. is sole sponsor of the listing, while Citigroup Inc., CMB International Capital Ltd. and UBS Group AG are joint global coordinators.

ABC International Holdings Ltd., AMTD International Inc., BOC International Holdings Ltd., China International Capital Corp., CLSA Ltd., HSBC Holdings Plc and ICBC International Holdings Ltd. also have a role on the deal as joint bookrunners.

Yum China operates 10,000 restaurants in more than 1,400 cities across China, according to its website. The company reported a sputtering recovery from the effects of the coronavirus pandemic, with sales improving in April and May but weakening again in June, according to its latest earnings. It said comparable sales in the second quarter fell 11% from the previous year and it expects them to remain under pressure in the third quarter.

China’s economy is recovering from the Covid 19-induced slump faster than many other countries. Consumer spending on items such as cars outpaced that of catering, which was down 11% in July.

Contact editor Bob Simison (bobsimison@caixin.com)

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