Proposed Privatization of Little Sheep at HK$6.50 per Scheme Share

  • Yum! proposed a pre-conditional cash offer to privatize Little Sheep by way of a scheme of arrangement
  • Yum!’s China Division to operate and manage the business together with co-founders Mr. Zhang Gang and Mr. Chen Hongkai, who will continue to participate in the Company post transaction
  • Cash cancellation consideration of HK$6.50 per Scheme share, a 30% premium to the Company’s last closing price of HK$5.00 on 21 April 2011
  • Yum! believes the privatization will benefit the development of Little Sheep in a fragmented and highly competitive market

HONG KONG, May 13, 2011 – Yum! Brands Inc., (NYSE: YUM) (“Yum!”) and Little Sheep Group Ltd. (HKEx: 968) (“Little Sheep” or “the Company”) today jointly announced that on 2 May 2011, Yum! requested the board of directors of Little Sheep to put forward a pre-conditional proposal (“the Proposal”) for the privatization of Little Sheep by way of a scheme of arrangement (“Scheme”).

Under the Proposal, Yum! will, through an indirectly wholly owned subsidiary, offer Little Sheep shareholders HK$6.50 cash per Scheme share, representing a 30% premium over the Company’s last closing price of HK$5.00 on 21 April 2011. The making of the Proposal will be subject to the satisfaction of the pre-condition that consents and approvals have been obtained from MOFCOM and all applicable PRC regulatory bodies.

Yum! and the founders of Little Sheep, namely Mr. Zhang Gang (Chairman of Little Sheep) and Mr. Chen Hongkai (a non executive director of Little Sheep) (“Participating Founders”), have agreed that Mr. Zhang and Mr. Chen will continue to participate in the Company alongside Yum! and Mr. Zhang Gang will be appointed as the Founding Chairman of the Board. Upon the Scheme becoming effective, Yum! will own approximately 93.2% of the issued share capital of the Company, and the Participating Founders will hold the remaining 6.8%.

The highly fragmented domestic restaurant industry in China has seen intensifying competition over the past years. In such a highly competitive market, Yum! believes that the privatization of Little Sheep will enable the business to achieve a more economically viable business model in the market and to better tap its potential opportunities.

Yum!, the largest global restaurant operator in terms of system units , has been an investor of the Company since 2009, with a current shareholding of 27.2%. Yum! believes that a stronger partnership with Little Sheep will accelerate the development of the Little Sheep brand, its business model as well as its market position in the long-term.

Yum! believes that as a non-listed company, Little Sheep will benefit from certain flexibilities, including having the ability to gain access to additional growth capital from Yum! at short notice and without exposure to market volatility, and the ability to make investment decisions focused on the long-term benefits.

Since entering the China market in 1987, Yum! has shown great commitment to the China market and to servicing their Chinese customers. China has become Yum!’s number one market in terms of restaurant development.

If the Scheme is implemented, Yum! expects to use its experience in China restaurant operations to help support the development of the existing hot pot restaurant business of Little Sheep, so that Little Sheep may continue to provide consumers with fine restaurant service and dining experience. Little Sheep is a recognized brand in the PRC and is highly complementary to Yum!’s business portfolio.

Mr. Zhang Gang, Chairman of Little Sheep, commented:

“Since the inception of Little Sheep, we have been operating the business with an open-mind and a vision beyond the domestic market. Following the introduction of foreign investors in 2006, our Hong Kong-listing in 2008 and Yum! becoming a strategic investor in 2009, this opportunity is a way to continue exploring best opportunities for Little Sheep. I believe that the strong capability and expertise Yum! possesses in managing world class brands and growing restaurant networks will significantly further Little Sheep’s development in China and overseas, and should leave us well positioned to develop into an internationally-recognized restaurant chain. I am looking forward to my continued participation in the Company after the successful completion of the transaction. I am optimistic about Little Sheep’s long-term prospects and am committed to working with our business partners and employees to provide high quality, healthy Chinese food to a growing customer base in the future.”

Mr. Sam Su, Chairman and CEO of Yum!’s China Division, commented:

“Yum! first entered into China in 1987. We have been operating based on the principal of “Rooted in China, Part of China” (“立足中国、融入生活”) The restaurant industry in China is highly competitive, but we are optimistic about the outlook and the opportunities. With strong commitment to the China market and to the Little Sheep business, together with the support from Chairman Zhang, Mr. Chen and the existing management, we are confident we can further strengthen Little Sheep’s brand, business model and market position in the industry. We have seen from Little Sheep’s previous explorations that there is a demand for the hot pot concept in overseas markets and that there is the potential for further development internationally. In long term, with its global business network and successful brand building experience, Yum! will work with Little Sheep to explore effective ways of introducing the hot pot concept and the Little Sheep brand to a wider global audience.”

The Company has appointed an Independent Board Committee, comprising all of the Company’s Independent Non-Executive Directors to make a recommendation to the Little Sheep shareholders in connection with the Proposal and Scheme. An independent financial advisor will also be appointed to advise the Independent Board Committee.

Subject to satisfaction of the Pre-Condition, the Scheme document containing further details of the Proposal and the Scheme, the expected timetable, information regarding Little Sheep, and other relevant information to the transaction, will be despatched to the Little Sheep shareholders as soon as practicable.

About Little Sheep Group Ltd
Little Sheep is a company incorporated in the Cayman Islands with limited liability, whose shares have been listed on the Main Board of The Stock Exchange of Hong Kong Limited since 12 June 2008. The Little Sheep Group is principally engaged in the operation of a full service restaurant chain, provision of catering services and sale of related food products.

About Yum! Brands and Yum! China
Yum! Brands is listed on the NYSE (YUM). It is the world’s largest restaurant company based on number of system units, with nearly 38,000 units in more than 110 countries and territories. Through the five concepts of KFC, Pizza Hut, Taco Bell, Long John Silver’s and A&W, Yum! develops, operates, franchises and licenses a worldwide system of restaurants which prepare, package and sell a menu of competitively priced food items.

Based in Shanghai, the China division of Yum! Brands, Inc. is recognized for its size, unique strength and importance. In 2010, the China division of Yum! Brands, Inc. opened more than 500 new restaurants in mainland China. KFC also continues to be the number one quick-service restaurant brand in mainland China today, with over 3,200 restaurants in more than 700 cities. Pizza Hut is also the number one casual dining brand in mainland China with 520 Pizza Hut Casual Dining restaurants in over 130 cities.

For Media and Investor inquiries, please contact:

Brunswick Group Limited

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Yum! Brands, Inc.

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Little Sheep Group Limited

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As at the date of this press release, the directors of Wandle Investments Limited are Ms. Donna Marie Heatherly and Mr. Alan Jay Kohn.

The directors of the Wandle Investments Limited jointly and severally accept full responsibility for the accuracy of the information contained in this press release (other than that relating to the Little Sheep Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this press release (other than those expressed by the Little Sheep Group) have been arrived at after due and careful consideration and there are no other facts not contained in this press release, the omission of which would make any statement in this press release (other than that relating to the Little Sheep Group) misleading.

As at the date of this press release, the directors of Yum! are:

Executive Directors:
David C. Novak
Jing-Shyh S. Su
Independent non-executive Directors:
David W. Dorman
Massimo Ferragamo
J. David Grissom
Bonnie G. Hill
Robert Holland, Jr.
Kenneth G. Langone
Jonathan S. Linen
Thomas C. Nelson
Thomas M. Ryan
Robert D. Walter

The directors of Yum! jointly and severally accept full responsibility for the accuracy of the information contained in this press release (other than that relating to the Little Sheep Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this press release (other than those expressed by the Little Sheep Group) have been arrived at after due and careful consideration and there are no other facts not contained in this press release, the omission of which would make any statement in this press release (other than that relating to the Little Sheep Group) misleading.

As at the date of this press release, the directors of the Company are:

Executive Directors:
Zhang Gang
Lu Wenbing
Zhang Zhanhai
Li Baofang
Wang Jianhai
Non-executive Directors:
Chen Hongkai
Su Jing Shyh Samuel
Koo Benjamin Henry Ho Chung
Hsieh Hui-yun Lily
Independent non-executive Directors:
Xiang Bing
Yeung Ka Keung
Shin Yick, Fabian

The directors of the Company jointly and severally accept full responsibility for the accuracy of the information contained in this press release (other than that relating to the Yum! Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this press release (other than those expressed by the Yum! Group) have been arrived at after due and careful consideration and there are no other facts not contained in this press release, the omission of which would make any statement in this press release (other than that relating to the Yum! Group) misleading.

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