Yum Brands is separating into two publicly traded companies.
The fast-food company announced on Tuesday thatYum China would be a franchisee of Yum Brands in mainland China, with exclusive rights to KFC, Pizza Hut, and Taco Bell.
And, Yum Brands will focus on expanding the three restaurants across the world.
Basically, it’s a spin-off of the China business.
Yum Brands CEO Greg Creed said in the statement:
Over the past year, our management and Board have thoroughly evaluated a range of value-creating opportunities that capitalize on our considerable strengths. 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.
The company plans to take advantage of growth opportunities in China and operate its business there as a self-sustaining unit.
Yum China will be led by Micky Pant, who was appointed CEO in August, and Creed will lead Yum Brands.
Earlier this month, Yum Brands reported third-quarter earnings results that were worse than analysts expected. It also cut its outlook for sales in China.
After those results, which followed at least four straight quarters of declining sales, some analysts suggested the company was better off as two separate units.
Nomura analysts said the company should get rid of Taco Bell. They said a separate Taco Bell would have the opportunity to be well managed and not compete for the parent company’s resources.
But their bigger point was that investors who want to “ride the China roller coaster” on its own would have the opportunity to do so with two separate units.
We also noted that the company got one step closer to splitting up after activist investor Keith Meister of Corvex Capital joined the board last week. Meister had previously proposed separating the China unit into “China Co.”
Yum Brands shares rose about 4% in premarket trading and are down about 1% year-to-date.