Yum Brands, which owns KFC and Pizza Hut, is in talks to facilitate a merger of its Indian franchisee partners Devyani International and Sapphire Foods, the Economic Times reported on Friday, citing sources.
Shares of Sapphire Foods rose 7.5% while Devyani was trading 2.8% higher as of 1:40 p.m. IST.
The development comes at a time when most fast food franchisees across India are struggling with a slowdown in same-store sales growth and margin expansion, as consumers reeling under the high cost of living cut back on dining out and ordering in.
Sapphire reported a 6% sequential decline in KFC and 13% sequential decline in Pizza Hut’s average daily sales for the quarter ended March, while Devyani’s KFC same-store sales saw a decline of 6.1% in the fourth quarter year-on-year. However, Pizza Hut’s same-store sales grew 1%.
The talks could see Sapphire Foods merge into Devyani International via a share swap, with Sapphire shareholders potentially receiving one Devyani share for every three held, the newspaper reported, citing one source.
The deal may involve Devyani acquiring Sapphire’s KFC and Pizza Hut franchise rights, or consolidating all KFC franchisee stores in India under Devyani, the report added.
Devyani’s market capitalisation is at 211.4 billion rupees ($2.48 billion), while Sapphire’s stood at 110.8 billion rupees, according to data from the National Stock Exchange of India.
Devyani had more than 2,000 stores across its network in India, Thailand, Nigeria and Nepal, as of March 31. Sapphire had 836 KFC and Pizza Hut restaurants in India and 127 Pizza Hut and Taco Bell restaurants in Sri Lanka as of March end.
Devyani and Sapphire did not respond to requests for comment, while U.S.-based Yum Brands was not available for comment outside regular business hours.
Reuters
