Yum China closes $1.2bn Pizza Hut brand acquisition, expects 2.8% margin improvement from licence fee savings and store openings to rise to 800 per year by 2027.
Yum China Holdings has closed its $1.2bn acquisition of the Pizza Hut brand in Mainland China from Yum! Brands, the company said Tuesday. The deal, first announced in June, transfers ownership of the brand to the operator that has run Pizza Hut locally for 36 years.
The removal of the 3% licence fee Yum China paid to Yum! Brands is expected to add 2.8 percentage points to Pizza Hut's restaurant and operating profit margins, net of VAT. Chief executive Joey Wat said the savings would bring Pizza Hut's restaurant margin closer to KFC's.
Once deal costs, interest, financing charges and taxes are accounted for, and excluding any potential incremental growth from Pizza Hut, the company expects the acquisition to be slightly accretive to diluted earnings per share in 2026 and mid-single-digit accretive in 2027 and 2028.
"Becoming the owner of the Pizza Hut brand in Mainland China is a major breakthrough for us, after operating the brand in the market for 36 years," Wat said. "Over the longer term, we expect that brand ownership will give us greater strategic flexibility and allow us to respond more nimbly to market opportunities and consumer needs. In 2027 and 2028, we expect to accelerate Pizza Hut's net new store openings from the original target of over 600 to more than 800 per year."
Yum China funded the purchase with an offshore yuan-denominated bridge loan equivalent to about $1.2bn, carrying a tenor of up to 12 months at a 2% interest rate. The company is China's largest restaurant operator, running more than 19,000 outlets under six brands.
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