Yum China Holdings Inc is holding talks to acquire local food delivery player Daojia.com for approximately $200 million, two sources close to the matter told Reuters, as the fast food restaurant giant continues its quest for expansion in the Chinese market after its recent spin off operation.

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Sources, however, warned that negotiations are still in its initial stage and there is uncertainty if the deal will fall through. 

Yum China is in dilemma whether to completely acquire Daojia.com or to buy smaller stakes in series and have meaningful say in company's day-to-day operation, one sources added.

Yum for long has been nursing the ambition to triple its outlets in China, but with food habits changing in the world's second largest economy, food delivery sectors has emerged as a crucial investment area for the food restaurant giant.

Yum China has so far refused to comment, while Daojia.com including its strategic investors JD.com and Macquarie Capital have also chose to remain silent.

Daojia.com was established in 2010 with clear aim to redefine food delivery services across China. Its main consumer target include China's burgeoning middle class families largely spread across 10 leading Chinese cities. The start-up firm is boosted with 3,000-strong logistics team and has tied up with more than 6,000 restaurants.

Over the years, the food delivery sector has grown in phenomenal pace, attracting investment from big Chinese companies such as JD.com, Alibaba, and Baidu.

Yum China would make maiden entry into the sector if this deal eventually falls through. The deal would also mark its first big investment after it spinned off its China business earlier this month. The spin off was carried out to cut its growing losses that was partly caused by a series of food scandals during the recent years.      

TagsYum China, Yum Brand, Daojia, Yum China Holdings