What happened?

Shares of Yum China Holdings, Inc. (NYSE:YUMC), China's largest restaurant company, are up 15% as of 12:15 p.m. EDT Thursday after reports that Hillhouse Capital is in discussions to acquire it. The fast-food company has over 8,100 restaurants including KFC, Pizza Hut, and Taco Bell.

So what

Hillhouse is an investment firm founded in 2005 with investments in a list of well-known companies such as Baidu, JD.com, and even the short-term home rental service Airbnb. Goldman Sachs is advising Yum China and Morgan Stanley is advising Hillhouse, according to sources for the news website The Information.

Bowl of fried chicken on a wooden table

Image source: Getty Images.

Now what

While the 15% pop Thursday is welcomed by investors, especially considering the stock's recent downgrade, it's wise to keep in mind that discussions are in the early phase and this is far from a done deal. In fact, a transaction value is still being discussed, and talks could derail any day.

However, investor excitement is building. Perhaps we'll get a few more details during the company's upcoming second-quarter earnings conference call on Aug. 1.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Baidu and JD.com. The Motley Fool has a disclosure policy.