Struggling Pizza Hut snapped up by private equity in $2.7bn deal
Struggling restaurant chain Pizza Hut is set to be offloaded to private equity by its owner Yum Brands in a $2.7bn deal.
Most of the pizza giant’s global operations will be sold to Long Range Capital just months after 250 restaurants were put on the chopping block.
Pizza Hut’s locations in mainland China are excluded from this deal, and will instead be acquired by Yum Brands’s Chinese arm for about $1.2bn.
The rest of the pizza chain’s operations will be sold to Long Range for $1.5bn, amounting to a total $2.7bn price tag for the chain. The deal comes after years of difficulty for Pizza Hut.
Domino’s Pizza has posed fierce competition to its restaurant estate, whilst third-party delivery apps like DoorDash and Deliveroo have also eaten away at its sales.
Yum, which also owns fast food chains KFC and Taco Bell, said in November that Pizza Hut’s potential “may be better executed” out of its ownership.
In February, Pizza Hut’s owner confirmed that it was considering the brand and unveiled plans to shut 250 of its US stores.
The pizza chain’s UK operations have faced particular struggles in recent months, when the firm which operates its British restaurants collapsed into administration in October last year.
DC London Pie owed nearly £30m when it collapsed and its failure caused the loss of more than 1,000 jobs, administrators FTI Consulting revealed.
In a statement released on Tuesday afternoon, Yum Brands said its strategic review concluded that Pizza Hut’s sale would “provide the strongest path to maximise shareholder value”.
The sale will give the restaurant chain an ownership structure “tailored to its distinct markets, competitive strengths and long-term priorities,” it said.
Chris Turner, Yum’s chief executive, said: “Under Long Range and Yum China, Pizza Hut will be well positioned for future growth with ownership that brings deep expertise in the restaurant industry.
“Pizza Hut is one of the most iconic restaurant brands in the world, and we are proud of the important role it has played in Yum’s history.”
Michael Halen, an analyst at Bloomberg Intelligence, said the deal will enable Yum to “sharpen its focus on its twin growth engines Taco Bell and KFC”.
Pizza Hut made up 18.7 per cent of the group’s system-wide sales last year but accounted for only 11.5 per cent of its operating income, before corporate expenses.
Shares in Yum, which is listed on the New York Stock Exchange, rose three per cent to $159 on Tuesday’s market open.
The pizza chain was founded in Wichita, Kansas, in 1958. PespiCo bought the firm in 1977 but spun off its restaurant division in 1997, to later become Yum Brands.
Long Range Capital was founded in 2019 and is based on Stamford, Connecticut. It controls a $1.8bn investment pool and operates a “company focussed and customer first philosophy”.