Closer To The Yum! Brands, Inc. (YUM) Spinoff?

Closer To The Yum! Brands, Inc. (YUM) Spinoff? by Stock Pucker

Busy building this quarter’s activist newsletters, but it’s easy to get distracted by the numerous other 13Fs out there. This entry isn’t all about the 13Fs, although it’s worth noting that we got some more insight into the size of Dan Loeb and Kieth Meister’s Yum! Brands position.

There’s no doubt that Yum! has needed an activist for some time now – with the plan of splitting the company. It got two the other week. Dan Loeb and his Third Point have a “sizable” stake. Loeb doesn’t plan on playing an activist role. Loeb’s said before that he’s up for a spin-off, but isn’t necessarily pushing for one.

The cliche goes, invest with a catalyst – in this case, the activist investor is the catalyst. Keith Meister is kingmaker here. It remains to be seen just how big his position is, but it’s said to be his largest position ever and is upwards of 3% of the fast food joint.

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Yum! gets a third of its operating income from China. Based on the Yum! investor conference in China last week, JPMorgan said that it got the impression that a spinoff of Yum China was now more a “probability” than a “possibility.” They upped their target from $83 to $108.

The ultimate scenario looks to be something along the lines of a tax-free spin of its China business, pursuing a joint U.S. and Hong Kong listing.