Fast-food restaurant owner Yum Brands Inc. said Friday that it is formally offering to buy most of the remaining shares of Chinese hot pot chain Little Sheep.
Restaurant growth overseas, particularly in China, has been a key driver for Yum's profit growth.
The operator of the Pizza Hut, Taco Bell and KFC chains is offering 6.50 Hong Kong dollars (83 cents) per share to boost its stake in Little Sheep Group Ltd. That is a 32 percent premium to Thursday's closing price of 4.93 Hong Kong dollars on the Hong Kong exchange.
The move comes after Louisville, Ky.-based Yum said in late April it was considering making the bid.
The offer values all of Little Sheep at about 6.7 billion Hong Kong dollars ($863.5 million).
The deal would increase Yum's ownership of Little Sheep to 93.2 percent from 27.2 percent with company founders owning the remaining 6.8 percent stake.
Baird analyst David Tarantino estimates Yum will pay about $580 million to $590 million during the deal, including expected option buyouts and excluding the stake it already owns.
"The move appears consistent with Yum's strategy to build on its market-leading position in China through multiple growth platforms," he said
He added the deal will "amplify" Yum's long term growth potential in China, which accounted for about 37 percent of Yum's 2010 revenue.
Yum said the Chinese restaurant industry has become increasingly competitive and taking Little Sheep private would help the company expand in that environment.
Sum Su, chairman and CEO of Yum's China division, said the deal could allow the company to expand Little Sheep's hot pot concept internationally.
Yum shares rose 13 cents to $54.86 during morning trading Friday.