Yum Brands, the parent company of well-known fast-food chains KFC and Taco Bell, announced earlier this year its intention to divest the Pizza Hut brand.
WASHINGTON — Pizza Hut, known for its iconic red roof and classic American pizzas, is set to be acquired by Yum Brands for a sum of $2.7 billion. This decision comes as the chain grapples with challenges such as outdated infrastructure and intensifying market competition.
In February, Yum Brands indicated it was exploring the possibility of selling Pizza Hut, and the pizza giant subsequently revealed plans to shutter 250 of its U.S. locations. The chain has faced mounting pressure to modernize its offerings and facilities.
Pizza Hut’s journey began in 1958 in Wichita, Kansas. It caught the eye of PepsiCo, which purchased the chain in 1977. However, in 1997, PepsiCo spun off its restaurant division, leading to the creation of Yum Brands.
On Tuesday, it was announced that private equity firm LongRange Capital will acquire Pizza Hut, excluding its operations in mainland China, for approximately $1.5 billion. Meanwhile, Yum China Holdings Inc. will take over the mainland China segment of Pizza Hut for about $1.2 billion.
“Under LongRange and Yum China, Pizza Hut will be well positioned for future growth with ownership that brings deep expertise in the restaurant industry,” Yum Brands CEO Chris Turner said in a statement.
Yum Brands, whose other brands include KFC and Taco Bell, began a strategic review to explore options for Pizza Hut in November, with the chain reporting declining sales at comparable stores.
“Pizza Hut has long been the weak link in Yum’s portfolio,” Neil Saunders, managing director of GlobalData, said in a statement. “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.”
By selling Pizza Hut, Yum Brands can focus more on its brands with stronger sales, he 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.