YUM China is on its way. Alibaba affiliate Ant Financial and a key investor in Alibaba, Primavera Capital, are to put $460 million between them into Yum China. This is a new venture by Yum Brands, owner of Taco Bell, Pizza Hut and KFC. In fact, Primavera will be putting $410 million into the deal with Ant Financial investing $50 million. They will have the option to buy an additional 4% of the business.
Ant Financial runs Alipay, Alibaba’s payments service. It recently raised an astonishing $4.5 billion at a $60 billion valuation, and wants to put some of that money to work to expand its business. Yum China intends to go it alone in China and operate all Yum brands in the country, trading on the New York stock Exchange under the ticker YUMC. This begins in just under a month, on November 1. Primavera Capital is a China-oriented private equity company.
YUM intends to use the Alipay mobile and checkout payment services in all KFC, Taco Bell and Pizza Hut restaurants in China and assist in the introduction of loyalty programs and some other commercial systems which may be new to China. Alipay will reduce checkout and cash register waiting times.
It intends using what is generally known as an OTO strategy – online to offline – to use its technical knowhow to develop non-technical businesses. This approach has proved successful for other businesses in the past and will a major technical innovation of the Yum China investment.
Yum has been having some difficulties recently, and was involved in a recent bird flu outbreaks and also some scandal over its meat supplier. It has not being doing well lately against large competitors, including McDonalds. Nevertheless, it has money to spend, and plans to treble the number of restaurants it operates in China.
Ant Financial also interests in India. Along with Alibaba, it has invested in an e-commerce and mobile payments business known as Paytm. This business has 122 million users at the beginning of 2016, with 52 million transactions processed each month. This figure has increased by 230% each year. Ant Financial and Alibaba have plans, and the money to see them through.
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