Yum Brands has bowed down to its activist shareholders who have been pressing the company in the recent months amid food controversies and marketing missteps. The American fast food company has decided to split off its China business and named it Yum China.
According to USA Today, Yum Brands announced Tuesday that it is spinning off its China business, turning the latter into a mainland China franchise called Yum China.
Amid this move, Yum China will be tasked to pay a percentage of its sales to its parent company for its three famous brands: KFC, Pizza Hut and Taco Bell.
Last week, activist investor Keith Meister was named the company's board of directors after it proved to be the most vocal shareholders in favor of spinning off the business in China.
While Yum China will be led by CEO Micky Pant, its parent company will be managed by current CEO Greg Creed.
The separation of Yum Brands from Yum China is expected to be fully realized before 2016 wraps up, but it is already expected to not have significant debt, as per RTE.
More details about this big move for Yum Brands are expected to unfold on Dec. 10 during the company's investors day.
In over 1,000 cities in the Asian country, Yum China has 6.900 restaurants. This 2015, the company added 700 more branches.
"The separation of these two businesses gives shareholders the choice to own a growing annuity-like franchise cash flow stream, as well as the leading restaurant concept in a country with the fastest-growing consumer class," a Meister investor told Reuters.
In the recent quarters, Yum Brands' China business struggled to keep or increase its sales amid a slowed down economy.
Howard Penney, an analyst for Hedgeye Risk Management said, "Yum Brands will trade at a higher multiple because it's a better business now that it's not attached to Yum China."
