Yum Brands will sell Pizza Hut for $2.7 billion in two deals, with longrange capital buying the chain outside mainland China for about $1.5 billion and Yum China Holdings Inc. taking the mainland China business for approximately $1.2 billion. The move follows a strategic review that began in November and comes after Pizza Hut faced declining comparable sales and pressure from outdated stores.
Chris Turner said, “Under LongRange and Yum China, Pizza Hut will be well positioned for future growth with ownership that brings deep expertise in the restaurant industry,” putting the focus on who will own the brand next. For investors, the change means Yum is turning a struggling asset into cash instead of continuing to fund a turnaround that has taken years to show progress.
LongRange Capital, Yum China Split
$1.5 billion is the price LongRange Capital will pay for Pizza Hut’s business excluding mainland China, while Yum China’s $1.2 billion purchase covers the chain’s operations in that market. The split keeps the global brand intact at the ownership level but divides the asset between a private equity firm and a company already tied to Yum’s China operations.
250 U.S. restaurants were expected to close, a sign that the chain’s store base had already been under pressure before the sale was announced. Pizza Hut has also been dealing with outdated stores and growing competition, and Yum said the brand reported declining sales at comparable stores, making the transaction less a simple divestiture than a reset of who carries the turnaround burden.
Yum's November Review
November is when Yum Brands began a strategic review to explore options for Pizza Hut, then in February said it was considering a sale. Tuesday’s announcement turns that process into two separate transactions, with both expected to close in the third quarter.
Neil Saunders said, “Pizza Hut has long been the weak link in Yum’s portfolio,” adding, “Despite efforts to revitalize the brand and shut underperforming locations, it has become increasingly clear that pushing the division back into growth will require a level of investment and patience that Yum is just not prepared to commit to.” That leaves the new owners with the task of funding the next phase of the chain’s recovery, while Yum exits a business founded in 1958 in Wichita, Kansas, that PepsiCo acquired in 1977 before spinning off its restaurant division in 1997.
