Yum! Brands To Spin Off Struggling China Division

(RTTNews) - Yum! Brands Inc. (YUM) said Tuesday that it plans to separate into two publicly traded companies. The owner of Kentucky Fried Chicken and Pizza Hut noted that its struggling China division will become an independent company that will be focused on growth in mainland China.

The fast-food company's decision follows a rigorous review of strategic options conducted over the past year by its board of directors and management team. The company expects the transaction to be completed by the end of 2016.

Yum! Brands' efforts to split the Chinese operations from the rest of the company follow calls from activist investor Keith Meister, the founder of hedge fund Corvex Management, for Yum to focus on the U.S.

The company's financial results in recent quarters have been hurt largely by continued weak performance at its China division.

Yum! China will become a franchisee of Yum! Brands in Mainland China. It will have exclusive rights to three category-leading brands - KFC, Pizza Hut and Taco Bell. The company noted that Taco Bell has not yet expanded in China, providing significant upside potential.

According to the company, Yum! China has the potential to grow to 20,000 restaurants or more in the future from about 6,900 restaurants today.

Meanwhile, Yum! Brands will focus on expanding the presence and performance of KFC, Pizza Hut and Taco Bell around the world.

Yum! Brands noted that it will become more of a "pure play" franchisor over time, and is targeting having at least 95 percent of its restaurants owned and operated by franchisees by the end of 2017. It currently has a global base of over 41,000 restaurants, with about 2,000 new units being opened each year.

Upon completion of the separation, Yum! Brands will be led by its Chief Executive Officer Greg Creed, while Yum! China will be led by Micky Pant, who was named its CEO in August.

The company will discuss further details of the plans and strategies for both companies at its Analyst/Investor Day on December 10, 2015.

Yum! Brands also said it is committed to returning substantial capital to shareholders in conjunction with the separation.

YUM closed Monday's trading at $71.71. In Tuesday's pre-market activity, the stock is up $3.48 or 4.85 percent to $75.27.