The stock price of Yum! Brands closed $69.29 per share, up more than 1% and climbed further by 1.53% to $70.35 per share during the extended trading on Thursday.
The stock moved upward after Yum! Brands announced the appointment of activist investor Keith Meister to its Board of Directors. Mr. Meister is the founder and managing partner of Corvex Management, which is one of the largest shareholders of the restaurant chain operator. His appointment is effective Friday, October 16.
Mr. Meister recommended the spinoff of the company’s business in China to unlock value for shareholders. He believed that the stock price of Yum! Brands could easily gain 50% to 90% if a spinoff occurs.
In a statement, Mr. Meister said they have a constructive dialogue with the Board and management of the company. According to him, Yum! Brands has “multiple avenues for unlocking significant long-term value. I look forward to working with the Board and management to expeditiously finalize a plan that we believe can deliver that value to shareholders.”
On the other hand, Yum! Brands Executive Chairman David Novak said Mr. Meister’s “deep financial expertise will be invaluable to us as we conclude our disciplined review of our strategy and structure.”
Yum! Brands review of strategic options nearly complete
Yum! Brands said its Board and management are almost close to completing a thorough review of strategic options including those related to the company’s structure. The company plans to reveal the outcome shortly.
Greg Creed, Chief Executive Officer of Yum! Brands said, “This has been a comprehensive, year-long process, working with our financial and legal advisors, and we are near its conclusion.”
Yum! Brands updated outlook
Yum! Brands also released its updated EPS and same store sales growth outlook for the full year for its China division.
The company revealed that its China division continues to struggle and expected its same-stores sales growth in the range of 0% to 4%. For the full year, it is expected to be in the low single-digit negative. Its operating profit is expected to be flat compared (excluding the impact of foreign exchange) to the previous year.
Yum! Brands forecasted that its China division’s EPS growth before special items will be flat to low-single-digit positive for the full year.