Yum Brands agrees to sell Pizza Hut in $2.7 billion split deal
LongRange Capital will buy most of Pizza Hut, while Yum China will take the mainland China business, Yum Brands said.
By Hana Yoshida · Markets Reporter
2 min read
Yum Brands said Tuesday it has agreed to sell Pizza Hut in transactions valued at about $2.7 billion, separating the chain from the owner of KFC and Taco Bell. The deal gives the struggling pizza business new owners after declining comparable-store sales and planned U.S. restaurant closures, according to Yum and reporting by Fortune and The Associated Press.
Private equity firm LongRange Capital will buy Pizza Hut outside mainland China for about $1.5 billion, Yum said. Yum China Holdings Inc. will purchase the mainland China Pizza Hut business for roughly $1.2 billion, the company said.
Yum expects both transactions to close in the third quarter, according to the company. The Louisville, Kentucky-based restaurant group announced the agreement after reviewing alternatives for Pizza Hut, a process it began in November.
The review followed weak performance at the chain. Fortune and The Associated Press reported that Pizza Hut had been posting declining sales at comparable stores, a key restaurant industry measure that tracks locations open long enough to compare year-over-year results.
Yum said in February that it was looking at a possible sale of Pizza Hut, according to Fortune and The Associated Press. At the time, the chain was also seeking to close 250 restaurants in the United States.
Pizza Hut has been hurt by older stores and rising competition, Fortune and The Associated Press reported. Yum described the sale as a way to put the brand under owners with restaurant experience.
Chris Turner, Yum Brands’ chief executive, said in a company statement that Pizza Hut would be positioned for growth under LongRange and Yum China because of their industry expertise. Yum did not announce changes to KFC or Taco Bell as part of the deal.
A long corporate history
Pizza Hut began in Wichita, Kansas, in 1958, according to Fortune and The Associated Press. PepsiCo bought the chain in 1977.
PepsiCo later separated its restaurant business in 1997, creating the company that became Yum Brands, according to Fortune and The Associated Press. Pizza Hut remained part of Yum alongside KFC and Taco Bell until the newly announced sale plan.
The mainland China piece will go to Yum China, a separate company that operates restaurant brands in that market. The rest of Pizza Hut’s business will move to LongRange Capital, the private equity buyer.
The sale marks a significant reshaping of Yum’s portfolio. For Pizza Hut, it follows months of scrutiny over the chain’s performance and the broader challenge facing older casual and quick-service restaurant brands as competitors fight for delivery, takeout and dining-room traffic.
This story draws on original reporting from Fortune.