KKR Getting a Good Price for Stake in Yum! Brands’ China Division

Supposedly Yum! Brands (YUM) and KKR are in talks to sell a 19.9% stake in Yum! China to KKR.

(Reuters) – Yum Brands Inc (YUM.N), the owner of the KFC and Pizza Hut chains, is in talks with private equity company KKR & Co LP (KKR.N) and others about a possible sale of a 19.9 percent stake in its China business, CNBC reported, citing Dow Jones.

The stake values the China business at about $10 billion, the report said.

We valued Yum! China using current depressed operating margins at $8-10 billion (with rounding). We think KKR is getting a great price for Yum! China.

If Yum! China’s operating margins and sales return to pre-food crisis levels combined with continued store openings we think in 5 years Yum! China could be worth $15-17 billion. Yum! China could be worth a lot more as they start opening Taco Bells in China too and further improve current stores’ efficiencies.

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