Restaurant company Yum! Brands has announced its intention to split into two publicly traded companies, one in China and one on a global basis.
Yum! Brands will aim to become a global “pure play” business with its three well-known fast-food joins Pizza Hut, KFC and Taco Bell, further aiming to push these brands further around the world.
The split-off company will see Yum! China become Yum! Brands’ largest franchisee and will operate under a Franchise Agreement. In China, it will focus on bringing KFC, Pizza Hut and Taco Bell around mainland China.
In a media release about the announcement, Yum! Brands said it wasn’t expecting any incremental operating costs with the running of the two separate businesses.
“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, CEO. “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.
“Yum! Brands will have a more stable earnings stream typical of a franchise company powered by industry-leading brands, while also benefiting from the development of the China business as a unique growth engine. In turn, our China business is self-sufficient and scalable with strong leadership in place, and is well-positioned to realize its full potential as a standalone business to capture the compelling opportunities in China.”
The completion of the transaction will be subject to a number of conditions, such as recieveing final approval from the Board of Directors, various regulatory nods of approval, tax matters and other bits and bobs.
Yum! Brands currently as more than 41,000 restaurants in more than 125 countries