The struggling Pizza Hut chain is being carved up and sold for $2.7bn, ending its decades-long run under the same owner that brought the world KFC and Taco Bell. Yum! Brands, the parent company that also owns those fast-food giants, announced on Tuesday that it would sell the pizza chain in two separate deals — a move that analysts said had been a long time coming.
Private equity firm LongRange Capital is buying Pizza Hut’s global operations, excluding mainland China, for about $1.5bn. The mainland China business will be purchased by Yum China Holdings, Inc for approximately $1.2bn. The sales come just months after Yum! Brands said in February it was considering offloading the chain, which had already been forced to close 250 US restaurants as it struggled with outdated stores and growing competition.
“Yum! Brands sells struggling Pizza Hut for $2.7bn in two deals to private equity and Yum China.”
“Pizza Hut has long been the weak link in Yum’s portfolio,” said Neil Saunders, managing director of GlobalData. “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.”
Yum! Brands began a strategic review to explore options for Pizza Hut in November after the chain reported declining sales at comparable stores. The pizza chain was founded in 1958 in Wichita, Kansas, and was acquired by PepsiCo in 1977 before being spun off into what became Yum! Brands in 1997.
“Under LongRange and Yum China, Pizza Hut will be well positioned for future growth with ownership that brings deep expertise in the restaurant industry,” the Yum! Brands CEO, Chris Turner, said in a statement. By shedding Pizza Hut, Yum! Brands can focus more on its brands with stronger sales, Saunders added.
Yum! Brands, based in Louisville, Kentucky, expects both transactions to close in the third quarter. The company’s stock declined slightly before the market open on Tuesday.