Yum Brands is splitting into two
Yum Brands is separating into two publicly traded companies, the company announced on Tuesday.
Yum China would be a franchisee of Yum Brands in Mainland China.
And, Yum Brands will focus on expanding KFC, Pizza Hut and Taco Bell across the world.
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 leverage the Chinese market for growth and operate its business there as a self-sustaining unit.
Earlier this month, Yum Brands reported third quarter earnings that were worse than analysts expected. It also cut its outlook for sales in China.
After those results, some analysts pointed out that the company was probably better off as two separate units.
We noted comment from Nomura indicating that 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.
The stock rose about 4% in premarket trading, and is down about 1% year-to-date.