A Little Sheep chain restaurant in Shanghai. Photo: IC

Yum! Brands Inc, one of the world's largest restaurant companies, announced Tuesday that it has got approval from the Chinese authorities to acquire the country's hot pot giant Inner Mongolia Little Sheep Catering Chain Co.

Yum! Brands, parent of KFC, Pizza Hut and Taco Bell, currently holds about 27.2 percent stake in Little Sheep. After the buyout, the US-based company will own 93.2 percent of the Little Sheep with the remaining shares held by the participating founders, which also means that Little Sheep will delist from the Hong Kong Stock Exchange.

The acquisition is estimated to cost Yum approximately HK$4.557 billion ($586.5 million), with the price of HK$6.5 in cash per Little Sheep share. 

Jing-Shyh Sam Su, chairman and CEO of Yum! Restaurants China and vice chairman of Yum! Brands, described the acquisition as "another important step" in executing their strategy of being "Rooted in China, Part of China."

Little Sheep said Tuesday the proposal has been cleared by the Ministry of Commerce under the country's Anti-Monopoly Law, and the detailed buyout document will be sent to its shareholders no later than next Monday.

"It's a win-win deal because Yum will get ownership of hundreds of restaurants in China, which will serve as a good platform for its business," said Zhao Jingqiao, secretary-general of the Research Center of Service Economy and Catering Industry of the Institute of Finance and Trade Economics under the Chinese Academy of Social Sciences.

Zhao said the offer price for Little Sheep shareholders is good, and the Inner Mongolia-based hot pot operator will also gain an advantage of expanding overseas markets by becoming a unit of an international food chain.

Little Sheep owns 467 restaurants, mostly in China, as of the end of June. Its revenue grew by 14.7 percent year-on-year to 804.5 million yuan ($126.77 million) during the first half year. 

Little Sheep had announced early in October that the authorities have extended the antitrust review of the acquisition for 60 days, which sparked market concerns that the takeover would fail, just like Coca-Cola's bid to buy Huiyuan Juice Group two years ago.

According to Feng Enyuan, secretary-general of the China Cuisine Association, the country's catering market is valued at 2 trillion yuan, and the combined annual income of Little Sheep and Yum in China is still too small to become a monopoly.