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Yum! to buy Pizza Hut stake from Whitbread?

01 July 2005
Yum! to buy Pizza Hut stake from Whitbread?

Leisure giant Whitbread has denied speculation that it has pulled out of its Pizza Hut franchise deal with American owner Yum! Restaurants.

Under the terms of the joint venture, Whitbread and Yum! each own 50% of the UK operation, which comprises more than 600 sites.

But an industry insider said Yum!, the owner of KFC and Taco Bell, had reached a deal to buy out Whitbread at the end of last week, a move which they claimed made sense for both sides.

"Yum! has done similar deals in other countries," said the source, "and it fits with its strategy of buying out franchise partners."

The source believes that the relationship between Whitbread and Yum! has run its course.

"The original reason for the joint venture was that Whitbread was growing restaurant brands and its experience of the UK market was useful to Yum! That's no longer the case."

The pull-out would also be consistent with recent calls for Whitbread to reorganise its business. A note issued by corporate broker Panmure Gordon last week said further restructuring at Whitbread was unavoidable.

"With only the budget hotels delivering growth above cost of capital returns, we believe Whitbread either has to restructure or face the prospect of a bidder doing it.

"We believe that Yum! management (50% owner) is a ready buyer of Pizza Hut. We estimate Whitbread's 50% share in Pizza Hut UK is worth around £120m."

A Whitbread spokeswoman dismissed the speculation.

"We have a strategic investment in Pizza Hut UK and we enjoy a good relationship with Yum! There are no plans in place to make any changes to our existing relationship and are committed to growing the business with them."

Yum! initially issued a denial, but withdrew it a few hours later and declined to comment further.

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