Shares in a Chinese restaurant chain extended its gains further Wednesday after a buy-out bid by the owners of US fast-food giants KFC and Pizza Hut was given regulatory approval.

The takeover of hot pot chain Little Sheep by Yum! was given the go-ahead by by China's commerce ministry to buy the chain, the firms said in a statement to the Hong Kong bourse, where the Chinese firm is listed.

Little Sheep closed up 0.31 percent at HK$6.39 Wednesday. The shares soared more than 15 percent to close at HK$6.37 on Tuesday when the announcement was made.

The buy-out, which is still subject to shareholder approval, would be one of the first successful foreign takeovers of a major Chinese brand.

Its green light surprised some investors, who expected it to fall foul of the country's monopoly laws, which analysts have suggested the government uses to prevent foreign firms getting hold in key sectors of the economy.

A bid by Coca-Cola's to take over China's largest juice maker, Huiyuan, two years ago was blocked by authorities who said they were concerned about its impact on competition.

Kentucky-based Yum!, which already owns 27.2 percent of Little Sheep, announced in April its plan to take over the Chinese firm in a deal that valued it at more than US$860 million.

Yum! has nearly 3,500 KFC outlets and about 560 Pizza Hut restaurants in China, making it one of the most successful foreign firms in the country.

Little Sheep, known across China for its mutton-themed hot pot, has 458 directly owned or franchised restaurants in the country and another 22 overseas.

-- Dow Jones Newswires contributed to this story --