BofA Said to Seek $800 Million in Deal to Divest Pizza Assets
BofA to Seek $800M in Deal to Sell Pizza Assets
dz/DZIMAGES/Newscom
Bank of America Corp., the lender divesting assets to raise capital, is in exclusive talks to sell its stake in the biggest U.S. Pizza Hut franchisee for more than $800 million, said two people with knowledge of the discussions.
Bank of America Corp., the lender divesting assets to raise capital, is in exclusive talks to sell its stake in the biggest U.S. Pizza Hut franchisee for more than $800 million, said two people with knowledge of the discussions. Photographer: dz/DZIMAGES/Newscom
BofA Said to Seek $800 Million in Sale of Pizza Hut
Aaron M. Sprecher/Bloomberg
Signage stands outside a Pizza Hut restaurant, a unit of Yum! Brands Inc., in Houston.
Signage stands outside a Pizza Hut restaurant, a unit of Yum! Brands Inc., in Houston. Photographer: Aaron M. Sprecher/Bloomberg
Bank of America Corp. (BAC), the lender divesting assets to raise capital, is in exclusive talks to sell its stake in the biggest U.S. Pizza Hut franchisee for more than $800 million, said two people with knowledge of the discussions.
Two private-equity firms teamed up to bid for NPC International Inc., which operates 1,140 Pizza Hut restaurants, said the people, who declined to be identified because the talks are confidential. One hurdle in closing the transaction is arranging debt financing for Overland Park, Kansas-based NPC as credit markets for buyouts tighten, the people said.
“They’ve got to do two things -- reduce riskier assets and continue to reallocate capital to other businesses,” said Jonathan Finger, whose family-owned investment company, Finger Interests Ltd., owns 1.1 million Bank of America shares. “These asset sales achieve both those goals, it’s a step in the right direction to slim the company down.”
Bank of America Chief Executive Officer Brian T. Moynihan has agreed to sell almost $50 billion in assets and units ahead of stricter international rules on capital. The firm said in April it was unwinding its flagship buyout fund because private- equity holdings will require a larger capital cushion under recommendations from the Basel Committee on Banking Supervision.
Jerry Dubrowski, a spokesman for the Charlotte, North Carolina-based lender, declined to comment. Troy Cook, NPC’s chief financial officer, didn’t return messages seeking comment.
28 States
The bank inherited NPC in its 2009 takeover of Merrill Lynch & Co., which bought the pizza purveyor in May 2006 for $615 million, according to a filing. NPC was founded in 1962 and accounts for about one-fifth of U.S. Pizza Hut restaurants, the firm said in August. Its stores are spread across 28 states, mostly in the Midwest and South, with about 26,000 employees.
The price being negotiated may be a premium to what fast- food franchise operators typically trade for. Rivals may be valued at 6 to 7 times earnings before interest, tax, depreciation and amortization, said Bryan Hunt, a Wells Fargo & Co. analyst. That would mean about $630 million to $735 million for NPC, which posted $105.5 million in Ebitda last year.
NPC is “highly leveraged,” which could hurt the firm’s ability to raise capital or repay debt, the company said in a February regulatory filing. The operator said it had $402.4 million in loans at year-end, $44.2 million in cash and $58.1 million available under a credit facility.
Asset Sales
Bank of America accelerated asset sales amid concern that the firm, which reported a record $8.8 billion second-quarter loss, will have to issue stock to bolster capital. The lender has lost more than half its market value this year. Moynihan has said repeatedly that the bank will reach capital targets by divesting assets deemed less important to customers, rather than issuing shares or divesting core units.
Bank of America agreed last week to sell its stake in U.S. hospital operator HCA Holdings Inc., another asset acquired by Merrill Lynch’s private-equity arm in 2006. Bank of America had $3 billion in proceeds from that investment, including dividends and a March initial public offering, the firm said.
Last month, the bank announced deals to divest a Canadian credit-card unit for C$7.5 billion ($7.3 billion) and sell about half its stake in China Construction Bank Corp., the world’s second-biggest lender by market value, for $8.3 billion in proceeds.
Moynihan is shrinking the bank through an initiative known as Project New BAC, which involves slashing 30,000 jobs from consumer banking and back-office operations. The firm expects to trim $5 billion in annual expenses by the end of 2013.
“We don’t have to be the biggest company out there,” Moynihan said at a Sept. 12 investor conference in New York. “We can get out of things we don’t need to do, make the company leaner, more straightforward, more driven.”
To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net
To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net; Rick Green at rgreen18@bloomberg.net
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