Yum! Brands Inc. agreed to sell its Long John Silver’s restaurants to LJS Partners LLC and the A&W All-American Food chain to A Great American Brand LLC for undisclosed prices as it focuses on expanding in China.
Definitive agreements have been reached to sell the chains, and the transactions are expected to be completed in the fourth quarter, the companies said today in a statement.
Yum bought Long John Silver’s and A&W for $320 million in 2002, bringing the total to five brands it could offer under the same roof in two-in-one or three-in-one combinations. The company put the chains up for sale in January to focus on boosting sales in China and from its Taco Bell, Pizza Hut and KFC restaurants in the U.S.
Long John Silver’s and A&W are “not really international growth platforms, which is what Yum is pursuing,” Sara Senatore, an analyst at Sanford C. Bernstein & Co. in New York, said today in a telephone interview. “They didn’t really have even the domestic demand or growth that Yum was looking for when they bought them in the first place.” Senatore rates the shares “market perform.”
Yum, based in Louisville, Kentucky, fell $1.58, or 3 percent, to $50.97 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have gained 3.9 percent this year.
The sale won’t have a material impact on earnings or cash flow, Yum said. Virginia Ferguson, a spokeswoman for Yum, declined to comment beyond the statement.
“As we continue to sharpen our long-term growth focus on international expansion and improving our U.S. brand positions in KFC, Pizza Hut and Taco Bell, Long John Silver’s and A&W no longer fit our long-term growth strategy,” Yum Chief Executive Officer David Novak said in the statement.
Yum reported second-quarter profit in July that exceeded analysts’ estimates as sales at stores open at least 12 months rose 18 percent in China. The company has sought to attract the growing middle class of that country, which accounted for about one-third of 2010 revenue.
In April, Yum said it would buy Little Sheep Group Ltd., which has about 450 hot pot restaurants in mainland China. Yum has more than 4,000 KFC and Pizza Hut stores in the Asian nation.
A&W, founded more than 90 years ago and known for selling root beer floats and hot dogs, has about 300 stores in the U.S. and 300 abroad. Since the first Long John Silver’s opened in 1969, the chain has grown to about 1,000 restaurants, mostly in the U.S.
Yum is scheduled to report third-quarter earnings on Oct. 4.