Unlike in other parts of the world, Yum owns most of its restaurants in China, which is why the unit is so important to the overall company. Of course, it is also one reason activists are so keen to shake things up there and would prefer to see a structure where the China segment acts more like a franchisee. Activists, including Keith Meister’s Corvex Capital and Dan Loeb’s Third Point, have thrown the China spin idea out there. Sell side analysts have as well, including a JP Morgan analyst saying it’s more of a probability at this point. For its part, Yum spokesman Jonathan Blum responded with a simple ‘No’ when asked if the management changes in China were in preparation for a spinoff, but that doesn’t mean much.
This story has been going on for so long now that it feels tired, but it continues to excite investors. The big investors are probably waging a ‘behind the scenes’ campaign, but management has said that it is solely focused on improving operating performance and fixing the brand. Hard to argue that doesn’t drive shareholder value and the company has seen an improvement in same store sales. Of course, China is currently facing it’s own challenges now and how the economy and various companies react to a slower growing beast (if that is what is happening) remains to be seen. Perhaps a spin will be in the offering if performance continues to pick up. Ultimately, despite a lot of press, there is nothing doing right now. For some reason though I feel like this isn’t the end of the story for Yum…
Disclosure: Author holds no position in any stock mentioned.