Keith Meister and his Corvex Management hedge fund has convinced Yum! Brands (NYSE: YUM) to split its China operations off from the rest of the business. More details will come via a December 10th investor day presentation.
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The idea is to allow the two distinct companies, one a high growth, volatile China play and the other a low growth high cash flow developed markets play, to operate independently. Something we’ve talked about ad infinitum in Activist Strategy.
Yum will keep its current CEO Greg Creed and Yum China will be lead by Micky Pant. The split is expected to happen by the end of 2016 and will be tax-free.
The new China-focused company will be a franchisee of Yum! Brands in mainland China with exclusive rights to KFC, Taco Bell and Pizza Hut.
Meister said – “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.”
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