Yum plans to spin off China business

The owner of KFC, Pizza Hut and Taco Bell plans to spin off its China business into a separate publicly traded company.

Yum Brands Inc. has had trouble with its China business. This month the Louisville, Ky., company cut its profit outlook for the year, citing a slower-than-expected comeback for its China division. In the latest quarter, Yum Brands reported that sales in China rose just 2% at established locations.

Yum has been trying to win back customers after negative publicity stemming from food supply controversies. The company has said that part of the difficulties in China are the result of a mix of external factors, such as the Chinese economy, as well as internal issues, such as the execution of marketing for Pizza Hut.

The announcement Tuesday of the planned split comes just five days after Yum Brands named activist investor Keith Meister to its board. Meister is the founder and managing partner of Corvex Management, one of Yum’s largest shareholders with nearly 5% of the company’s common stock. Meister previously said he had been in a “constructive dialogue” with Yum’s board and management over the last several months.

Yum Brands said it believes that the China business, which will be called Yum China after the separation, could grow from its current 6,900 restaurants to more than 20,000 restaurants in the future. The China business, which will be headquartered in Shanghai, had $6.9 billion in revenue last year.

Shares of Yum Brands rose $1.32, or 1.8%, to $73.03.