It may seem like an unlikely combination: Pizza Hut, 24 Hour Fitness and a funeral casket and urn maker.Subscribe to read this story ad-free Get unlimited access to ad-free articles and exclusive content.And yet those are the companies with which the pizza chain stalwart now finds itself under the same roof.
On Tuesday, Pizza Hut’s corporate parent Yum Brands, which also owns Taco Bell and KFC, announced it had sold the chain’s U.S.business for $1.5 billion to private equity group LongRange Capital.This firm, incidentally, owns the round-the-clock gym chain as well as Batesville, a company that services funeral homes with coffins, urns and “death care” products.
These three businesses are joined by a ski resort group, a diamond materials firm and a European food manufacturer in LongRange’s portfolio of brands.Pizza Hut’s China-based business is being sold separately to Yum’s China unit.
In the world of private equity, it’s relatively common to have a group of seemingly unrelated businesses under one roof, because they all are run with the same general strategy: Maximize returns for investors away from the glare of public markets.Since taking off in the 1980s, private equity firms have come to fill a gap in the American business landscape, taking over companies often in some kind of distress and subsequently making tough business decisions without having to worry about daily stock price fluctuations.The announcement of Pizza Hut’s acquisition is a textbook example.
The stalwart chain’s sales have stagnated for at least 20 years, according to research group Technomic, while other chains, especially Domino’s, have built up market share.Investors have for years called Pizza Hut a figurative albatross around Yum Brands share price — and it simply became clear that management no longer had the bandwidth, resources or patience to devote to a turnaround, some experts said.Yum shares were up 2.2% in Tuesday trading, signaling investors believe...