Yum Brands to separate China unit amid activist pressure

Tue Oct 20, 2015 2:19pm EDT
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By Lisa Baertlein and Sruthi Ramakrishnan

(Reuters) - KFC owner Yum Brands Inc (YUM.N: Quote) said it plans to spin off its dominant China business, which has been besieged by food scandals and marketing missteps, amid pressure from an activist shareholder who recently joined its board of directors.

Shares of the parent company of the KFC, Pizza Hut and Taco Bell chains rose about 5 percent to $75.22 in early trading, before retreating to $73.55 in the afternoon.

Yum's move on Tuesday is the latest sign of activist hedge funds' strengthening grip over Corporate America.

Keith Meister, CEO of hedge fund Corvex Management, in May disclosed a stake in Yum and unveiled his plan for a Yum China split at a major investment conference.

His arrival appeared to serve as a catalyst for the spin-off, which Yum spokesman Jonathan Blum said was the result of a "rigorous, year-long review."

Yum was already at "the 10-yard line" with regard to the China spin-off when Meister entered the picture, a person familiar with the transaction said, calling the relationship between Yum and activist Meister a "meeting of the minds."

Yum appointed Meister, a portage of billionaire activist investor Carl Icahn, to its board last week. Corvex owns nearly 5 percent of Yum.


A customer walks out of a KFC restaurant in Shanghai, China, October 9, 2015.  REUTERS Aly Song