People walk in front of a KFC fast food restaurant in Lhasa, Tibet Autonomous Region. (Photo : Getty Images)
Alibaba founder and CEO Jack Ma, who once got turned down when he applied for a job at KFC many years ago, has seen opportunities in China's fast food business as Alibaba's payment unit is investing in the sector to enable customers to use its mobile payment system at Yum! Brands Inc's 7,200 restaurants across the country, which also include Pizza Hut and Taco Bell.
"The investment is of a strategic nature," Jason Yu, general manager of Kantar Worldpanel China, said.
China Daily reported that the combined shares of the two Chinese investors are less than 5 percent of the total holdings of Yum China.
The daily operations of the fast food chains will not be affected by the investment, Yu assured.
Last Friday, Sept. 2, Ant Financial Services Group and Primavera Capital Group agreed to buy Yum! Brands Inc's $460 million stake in its Chinese operation in a deal that would pave the way for a spinoff of the business into a separate firm next month.
The report said that Ant Financial will invest $50 million into the business while Primavera, a Chinese private equity firm, will pour in $410 million in the spinoff.
The new company, which will be named Yum China, will be chaired by Primavera founder Fred Hu, the former chairman of Goldman Sachs Group Inc in China.
Yum has a fast-food empire that includes KFC, Pizza Hut and Taco Bell. It oversees more than 7,200 restaurants in China.
According to Yum, the spinoff will be completed on Oct 31 as scheduled and on Nov. 1, the new company will start trading on the New York Stock Exchange under the name YUMC.
Ant Financial will provide assistance to the electronic payment system of the restaurant brands.
"We expect Ant Financial can provide further unique insights to help us better connect with consumers through mobile technology," Micky Pant, Yum China's chief executive officer, said.
Last year, Yum was rocked by food safety scandals that affected its business across the country but it has improved its services and its performance in Asia has begun to pick up, the report said.
Although KFC chain's performance has helped the company's second-quarter profit estimates, yum's revenue still fell 3 percent to $1.6 billion in China, which account for about 53 percent of the group's total. The company's shares increased 24 percent this year.
Alibaba is expected to gain from the deal. "The deal will certainly accelerate the adoption of the Alipay mobile payment as well as digital marketing integration with Alibaba ecosystem," Yu said.
