3i and Prax Capital exit Little Sheep

The two firms in 2006 innvested $25m in the Inner Mongolian hot pot restaurant chain, which was listed on the Hong Kong stock exchange in June 2008. US restaurant company Yum! brands, which owns chains including Taco Bell and KFC, has paid $63m for a 20% stake in Little Sheep.

UK-listed private equity firm 3i has divested its 11.3 percent stake in Little Sheep. China-focused private equity firm Prax Capital has also divested its entire stake in the company, Jeff Yao, co-founder of Prax Capital, said in an interview.

The two firms declined to provide financial details, but separately, US restaurant company Yum! Brands said that it will acquire a 20 percent interest in Little Sheep for approximately $63 million. Based in the US, Yum! owns restaurant brands such as KFC, Pizza Hut and Taco Bell. It has more than 36,000 restaurants in more than 110 countries. In 2008, its revenues were in excess of $11 billion. 

In June 2006, 3i invested $20 million for a minority stake in Little Sheep, while Prax Capital co-invested $5 million. Since then, 3i has assisted the company’s franchise and business strategy development, executive and board recruitment, corporate governance and IPO preparation, according to 3i.

Headquartered in Inner Mongolia, Little Sheep is a hot pot restaurantchain with a 6 percent market share in China. At the end of 2008, thecompany operated 375 restaurants.

Little Sheep was listed on the Hong Kong stock exchange in June 2008. Last year, the company saw a 34 percent rise in revenues and a 41 percent increase in profit, from RMB91 million ($13 million; €10 million) to RMB129 million. Store sales also grew by 10 percent.

China is an important investment market for 3i, Anna Cheung, partner and co-head of 3i China, said in a statement. The firm, which recently closed its Shanghai and Hong Kong offices, will continue to look for attractive opportunities, particularly in the food and beverage, energy, general industrials and healthcare sectors, she said.