The operator of the KFC and Pizza Hut brands is separating into two publicly traded companies, bowing to pressure from an activist investor. Fred Katayama reports.
Yum's splitting. The operator of the fast food brands KFC, Pizza Hut and Taco Bell is separating its huge China business from its global business, creating two separate publicly traded companies. The yet-to-be-named China business will become a franchisee of Yum Brands, paying it for the brand rights in China for KFC, Pizza Hut, and Taco Bell. China used to be the star of Yum Brands. KFC was the first foreign fast food brand to enter China and dominates the market there. Yum's nearly 7,000 restaurants in China contribute more than half of its profit. But two food safety scandals and marketing missteps slammed sales there. Yum's same store sales have fallen for four straight quarters in China. In the end, it caved to pressure from activist investor Keith Meister to spin off its China unit to boost the company's value. Nomura analyst Mark Kalinowski said, "We view today's announcement as a large positive, as it will get Yum Brands off of the China roller coaster in a meaningful way and allow for better focus on enhancing non-China business lines." Yum's stock, which has fallen 18 percent in the last three months, rising in early trading. Yum says it expects to complete the split by the end of next year.