3i, an international leader in private equity, today announces the divestment of its 11.32% stake in China’s leading hotpot restaurant chain, Little Sheep Group Ltd. to Yum! Brands Inc. This brings 3i’s successful three year partnership with Little Sheep to a close, and generates a very strong return for 3i.

3i has been a highly active partner to Little Sheep and, via its board position, assisted with franchise and business strategy development, executive and board recruitment, corporate governance and IPO preparation in its primary market of China.

Specifically, the 3i team helped Little Sheep to sharpen its strategic focus on company-owned restaurants, developing its franchise model and aligning standards, also creating operational efficiencies, improving quality control, customer service and restaurant design, which all significantly enhanced Little Sheep’s brand image over the last few years.  Additionally, 3i used its extensive network within the consumer sector to introduce non-executive directors to the Company board and played a pivotal role in supporting Little Sheep’s highly successful IPO in Hong Kong in June. 3i’s support, the company’s strong brand and its focus on operational excellence has enabled Little Sheep to weather the challenging economic environment and continue its growth, as reflected in its recently announced full-year 2008 earnings results.

Little Sheep is the leading full-service restaurant chain operator with 6% market share in the PRC*. As of 31 December 2008, the company operated 375 restaurants. Little Sheep has performed strongly since 3i’s $20m investment in June 2006. The Group reported a 34% increase in revenues and a 41% rise in profits from RMB91 million (US$13 million) to RMB129 million (US$19 million) for 2008. Lastly, Little Sheep reported same store sales growth of 10% (up from 3% for 2007), demonstrating the growing success of the brand concept and innovation.

Anna Cheung, 3i Partner, and Co-head of 3i China commented: “We have been proud to work with such an exceptional management team and outstanding business as Little Sheep during the past three years.  This is a great example of 3i’s ability to generate good returns even in a challenging market environment, by creating real value and improved performance through hard work, collaboration with the Company and a strong partnership style.  We believe that Yum! is an excellent long term strategic partner for Little Sheep in the next phase of its growth.”

3i maintains a positive outlook on the long term fundamentals of investing in China and is well positioned for further investments in the region, particularly in the food and beverage, energy, general industrials and healthcare sectors. Anna Cheung added: “China is an important investment market for 3i and we will continue to look for attractive opportunities in the region.”