Yum Brands sells Pizza Hut chain for $2.7B
What's the story
Yum Brands, the parent company of Pizza Hut, has announced its decision to sell the iconic pizza chain for $2.7 billion. Under the terms of the agreement, private equity firm LongRange Capital will acquire Pizza Hut's international operations outside mainland China. Yum China Holdings Inc. will take full ownership of the brand's mainland division. The fast-food giant said it had explored all strategic options for Pizza Hut before deciding on this sale.
Transaction specifics
Sale to be executed in two parts
The sale will be executed in two parts. LongRange Capital will buy Pizza Hut's global business outside of mainland China for $1.5 billion, with a possible additional payment of up to $75 million by 2030. Separately, Yum China Holdings Inc will acquire Pizza Hut China for about $1.2 billion. The company expects these transactions to generate around $2.3 billion in net proceeds after taxes and transaction-related fees, excluding the potential earn-out from the LongRange Capital deal.
Business transformation
Pizza Hut will be well-positioned for future growth: Yum Brands
Yum Brands CEO Chris Turner said the transactions will make Yum a more focused company, leveraging scale, technology, and talent to create sustained value for stakeholders. He added that under LongRange Capital and Yum China, Pizza Hut will be well-positioned for future growth with owners who have deep restaurant industry expertise. The company also expects to incur one-time separation costs of about $85 million through the end of 2026.
Stock performance
Yum Brands shares rise on sale news
Following the announcement, Yum Brands shares rose as much as 1.3% in premarket trading. The company said that net after-tax proceeds will be used according to its capital allocation strategy, which includes reinvesting in the business and returning excess capital to shareholders. Yum's Board of Directors has approved an additional $4 billion authorization for common stock repurchase as part of this strategy.