After months of strategic review and years of underperformance, global restaurant conglomerate Yum Brands has finalized a $2.7 billion deal to sell its iconic pizza chain Pizza Hut, splitting the brand between a private equity firm and its former spin-off Yum China Holdings. The agreement, announced Tuesday, carves out Pizza Hut’s global operations excluding mainland China for a $1.5 billion purchase by private equity group LongRange Capital, while Yum China will acquire the China market Pizza Hut business for roughly $1.2 billion.
The sale caps a years-long stretch of struggle for the 66-year-old pizza brand, which has faced mounting pressure from industry competitors and held back by a large footprint of outdated, underinvested locations. Yum Brands first signaled it was exploring a sale of the chain back in February, after confirming it would shutter 250 underperforming U.S. locations to stem losses. At that time, the chain had already reported sustained declines in same-store sales that pushed the brand to become the lowest-performing holding in Yum’s brand portfolio.
Founded in 1958 in Wichita, Kansas, Pizza Hut has changed corporate hands several times over its history. Food and beverage giant PepsiCo purchased the chain in 1977, before spinning off its entire restaurant division in 1997 to form the independent Yum Brands, which also counted KFC and Taco Bell among its core holdings. For more than a decade, Pizza Hut lagged behind its sister brands in growth, as new competitors in the fast-casual and delivery pizza space eroded its market share.
Industry analysts have broadly framed the sale as a logical move for Yum Brands, which will now be able to redirect capital and leadership focus to its faster-growing portfolio brands. “Pizza Hut has long been the weak link in Yum’s portfolio,” explained Neil Saunders, managing director of industry research firm 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.” Saunders added that the divestiture will allow Yum to prioritize its higher-performing concepts with stronger sales trajectories.
Yum Brands CEO Chris Turner expressed confidence in the new owners’ ability to turn around the brand’s performance. “Under LongRange and Yum China, Pizza Hut will be well positioned for future growth with ownership that brings deep expertise in the restaurant industry,” Turner said in an official statement announcing the deal.
Yum China, which already operates KFC and Pizza Hut locations across mainland China as an independent franchisee, is well positioned to leverage local market knowledge to expand the brand’s footprint in the world’s second largest economy, while LongRange Capital brings specialized restaurant industry investment experience to the global operations. Both transactions are on track to close in the third quarter of the current year, per Yum Brands’ timeline. Ahead of the deal’s announcement, Yum Brands’ stock registered a small decline in pre-market trading.