April 26, 2011 / 12:47 PM / 8 years ago

UPDATE 2-Yum plans to buy China's 'Little Sheep' chain

* Yum already owns 27.2 percent, wants to buy most of rest

* Yum waiting for regulatory approval to formalize offer (Adds analyst comment, Yum share price, previous NEW YORK)

LOS ANGELES, April 26 (Reuters) - Yum Brands Inc (YUM.N), parent of the KFC, Taco Bell and Pizza Hut fast-food chains, said it made a preliminary offer to buy most of the shares of China’s Little Sheep (0968.HK) restaurants that it does not already own.

Yum, which owns 27.2 percent of Little Sheep’s stock, said it would wait for approval from regulators before making a formal offer for the remaining shares in the chain, which owns and operates Mongolian hot pot restaurants, primarily in China.

Yum said Little Sheep’s chairman and other shareholders would keep a minority interest.

“Should any proposed transaction close at a reasonable price, we would view it as a positive for Yum, as it would further solidify Yum’s position as the leading restaurant company in fast-growing China,” Janney Capital Markets Mark Kalinowski said in a client note.

Kalinowski disclosed that he owns shares of Little Sheep, which has a market value of about $555 million. Yum’s market capitalization is about $24.8 billion, he said.

Little Sheep has more than 300 hot-pot restaurants, primarily in China. Other markets include Japan, the United States — specifically California and Texas — and Canada.

Shares in Yum, which gets more of its profit from China than any other market, closed down 1.9 percent at $52.18.

Trading in Little Sheep shares has been suspended. (Reporting by Lisa Baertlein in Los Angeles and Phil Wahba in New York; Editing by Lisa Von Ahn, Gary Hill)

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