Yum Brands’ China unit nabs $460M investment as spinoff completed

Yum! Brands shares rose to their highest level since late June 2015 on Friday after the company said Primavera Capital Group and Alibaba’s Ant Financial Services Group will make a strategic investment of $460 million in Yum China, concurrent with the completion of Yum China’s spinoff from Yum!

Primavera has agreed to pay $410 million and Ant Financial will invest $50 million in Yum China.

Yum Brands says it will sell a stake in its China unit, which the parent company of KFC and Pizza Hut is spinning off later this year. Brands (YUM) soon-to-be spun off China unit.

Under the terms of the agreements, Primavera and Ant Financial will invest $410M and $50M, respectively. 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.

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Currently, Yum Brands operates 41,000 outlets in 125 countries with about 6,900 of them in China.

Primavera Capital, run by former Goldman Sachs Group Inc. Shareholders of Yum will take an initial dilution on the deal since the two investors will receive an 8 percent discount to the volume-weighted average trading price of Yum China’s equity value of the spinoff.

Two groups are enthused about the long-term prospects for Yum!

“We have long admired the Yum China business and are looking forward to collaborating with the board and management to realize the company’s full potential”, Hu said in a statement.

The spinoff and completion of the Primavera and Ant Financial investments are expected on October 31, with Yum China to begin trading on the New York Stock Exchange as an independent company on November 1.

Ant, the Alibaba affiliate, operates the widely used Alipay mobile payments platform. Brands in mainland China, with exclusive rights to KFC, Pizza Hut and Taco Bell, which has not yet entered China. “The investment is a clear endorsement of our business strategy and growth potential, and their diverse experience and relationships will be extremely beneficial”.

PJT Partners is serving as an independent financial advisor to Yum!

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.