Hop Hing, Franchisee of Yoshinoya and Dairy Queen in Northern China, Proposed Going Private

This is an English adaptation of a FoodBud historical article originally published on September 11, 2021.

While many companies were trying to list in Hong Kong, Hop Hing Group was moving in the opposite direction.

Hop Hing Group recently announced that the Hung family, led by controlling shareholder Hung Hak Hip and including CEO Hung Ming Ki, had proposed to privatize the company by way of a scheme of arrangement under Section 86 of the Cayman Islands Companies Act, and to withdraw its listing status.

The stated reason was weak share trading and reduced liquidity. At the time, Hop Hing Group’s Hong Kong market capitalization was only HK$745 million.

The Operator Profile

Hop Hing Group Holdings Limited is a Hong Kong investment holding company mainly engaged in the operation of quick-service restaurant chains.

In northern China, the company operates Yoshinoya and Dairy Queen restaurants, primarily across Beijing, Tianjin, Hebei, Liaoning, Heilongjiang, Jilin, and Inner Mongolia.

Privatization Terms

According to the company announcement, the Hung family held about 71.64% of Hop Hing.

The proposal cited persistently low liquidity. In the 24 months ended September 1, before the trading halt, average daily trading volume was about 4.304 million shares, representing only about 0.04% of issued shares.

The privatization offer price was HK$0.08 per share, a premium of about 73.9% to the pre-suspension closing price of HK$0.046. The privatization was expected to cost HK$229 million.

The announcement said the plan would give shareholders an opportunity to exit their investment. After privatization, the group said it would have more flexibility as a privately run business to formulate and implement long-term strategy, or pursue business opportunities that may not be feasible as a listed company because of regulatory constraints or compliance obligations.

First-Half 2021 Performance

On September 1, Hop Hing Group released its interim results for fiscal 2021.

For January 1 to June 30, 2021, the company reported revenue of RMB884 million, up 35.09% year on year. Net profit attributable to the parent was RMB8.698 million, reversing a year-earlier loss.

By brand, Yoshinoya contributed RMB740 million of first-half revenue, while Dairy Queen contributed RMB120 million. By geography, the Beijing-Tianjin-Hebei metropolitan area was the core market, contributing RMB660 million.

As of June 30, 2021, Hop Hing Group and its joint ventures had 590 operating stores.

Same-store sales in the first half rose 32.2% for Yoshinoya, 60.6% for Dairy Queen, and 34.5% for the group overall.

Operational Adjustments

To meet Generation Z demand, Hop Hing opened a technology-enabled restaurant. The new store used equipment such as automatic rice washers, automatic rice serving machines, and dishwashers to raise automation levels, improve customer experience, and reduce hourly labor cost.

After two years of strategic adjustments and an expanded hotpot product range, the group rolled out its hotpot business model in the first half of 2021. The launch included value hotpot meals for one person, designed to create a differentiated consumption occasion, raise the share of dine-in customers, and support steady growth in hotpot sales.

Note: privatization, market-capitalization, offer-price, and cost figures are historical as of the 2021 article.