Fast food giants explore divestments

PARAGRAPH 1 --- Yum Brands, the parent company of Pizza Hut, has agreed to sell the struggling pizza chain in two deals worth $2.7 billion. The first, announced in February, involves the sale of Pizza Hut's U.S. and international operations to private equity firm LongRange Capital for approximately $1.5 billion, excluding Mainland China. The second deal, announced on Tuesday, involves the sale of Pizza Hut's Mainland China operations to Yum China Holdings for about $1.2 billion. These sales follow Pizza Hut's plan to close 250 underperforming U.S. stores and come amidst a broader trend of restaurant chain closures, with over 700 locations shuttered in the past five years.

PARAGRAPH 2 --- The divestments impact the restaurant and fast-food sectors, with Pizza Hut's struggles highlighting the challenges faced by established chains in the face of growing competition and evolving consumer preferences. The deals also signal a shift in Yum Brands' strategy, focusing on its more successful brands, KFC and Taco Bell, and allowing private equity to take on the turnaround of Pizza Hut. The transactions could lead to valuation repricing in the restaurant sector, as investors reassess the prospects of other struggling chains.

PARAGRAPH 3 --- Next, investors should watch for the closure of the Pizza Hut deals, expected to be completed in the second half of 2021. Additionally, they should monitor Yum Brands' Q2 earnings, scheduled for July 29, to gauge the impact of the Pizza Hut divestments on the company's financials. Lastly, keep an eye on the performance of other restaurant chains, particularly those with struggling brands, as they may follow suit in seeking strategic partnerships or divestments.