Yum! Brands to separate into two publicly traded companies

Yum! China will become a franchisee of Yum! Brands and have exclusive rights to KFC, Pizza Hut and Taco Bell.

October 20, 2015

3 Min Read
Feedstuffs logo in a gray background | Feedstuffs

Yum! Brands Inc. recently announced it intends to separate into two independent, publicly-traded companies, each with distinct strategies and investment characteristics.

The first, Yum! China, will become a franchisee of Yum! Brands in Mainland China. It will have exclusive rights to three category-leading brands: KFC, Pizza Hut, and Taco Bell, which is expanding globally but is not yet in China.

The company said Yum! China will have an attractive investment profile and significant opportunity for growth. Additionally, it was expected to have no significant debt, with substantial financial capacity to invest in its business.

According to the company, Yum! China has the potential to grow to 20,000 restaurants or more in the future from approximately 6,900 restaurants today, with significant sales and profit growth potential in its existing restaurants.

The second company, Yum! Brands, will focus on expanding the global presence and performance of KFC, Pizza Hut, and Taco Bell, which are three of the top ten U.S. and global QSR concepts.

“Yum! Brands will become more of a ‘pure play’ franchisor over time, and is targeting having at least 95% of its restaurants owned and operated by franchisees by the end of 2017,” the company noted. It currently has a global base of over 41,000 restaurants, with approximately 2,000 new units being opened each year.

Yum! Brands said it is committed to returning substantial capital to shareholders in conjunction with the separation. This will occur as the company transitions to a non-investment grade credit rating with a balance sheet more consistent with highly leveraged peer restaurant franchise companies.

The company did not expect to have incremental ongoing operating costs associated with operating as two separate, publicly-traded companies.

~~~PAGE_BREAK_HERE~~~

According to the company, the Board’s unanimous decision to create two independent companies followed a rigorous review of strategic options conducted over the past year by Yum! Brands’ Board of Directors and management team, with the assistance of independent financial and legal advisors.

“Over the past year, our management and Board have thoroughly evaluated a range of value-creating opportunities that capitalize on our considerable strengths,” said Greg Creed, Yum! Brands chief executive officer. “Following the separation, each standalone company will be able to intensify focus on its distinct commercial priorities, allocate its own resources to meet the needs of its business, and pursue distinct capital structures and capital allocation strategies. This will provide a clear investment thesis and visibility to attract a long-term investor base suited to each business.”

Upon completion of the separation, Yum! Brands will be led by Mr. Creed, and Yum! China will be led by Micky Pant, who was named its chief executive officer in August. Further details of the plans and strategies for both companies will be discussed at the company’s Analyst/Investor Day on December 10, 2015, and in subsequent communications.

Completion of the transaction will be subject to certain conditions, including, among others, receiving final approval from the Yum! Brands’ Board of Directors, receipt of various regulatory approvals, receipt of an opinion of counsel with respect to certain tax matters, the effectiveness of filings related to public listing and applicable securities laws, and other terms and conditions as may be determined by the Board.

The company said there can be no assurance regarding the ultimate timing of the proposed transaction or that the transaction will be completed. However, the transaction was estimated to be completed by the end of 2016.

SUBSCRIBE_TO_FEEDSTUFFS

Subscribe to Our Newsletters
Feedstuffs is the news source for animal agriculture

You May Also Like