Yum Brands veteran and new CEO David Gibbs is wasting no time putting his stamp on the business.
Actually, make that a grill mark.
Gibbs — who officially took over from longtime Yum Brands (YUM) CEO Greg Creed on Jan. 1 — signed off on the $375 million acquisition of The Habit Grill on Monday. The purchase price of $14 a share represents a 33% premium over Habit’s Jan. 3 closing price. Yum Brands said it will fund the transaction using cash on hand and available borrowing capacity under its credit facilities.
Habit will join a portfolio of iconic Yum Brands fast-food businesses: Taco Bell, Pizza Hut and Kentucky Fried Chicken.
Shares of Habit (HABT) — which were down 6% over the past year leading up to the deal news — surged 32% in early trading. Yum Brands shares fell slightly.
For Yum Brands, at least on paper the acquisition of the California lifestyle-inspired burger brand appears to be a win for several reasons.
First, Habit gives Yum Brands a long sought after credible entry into the lucrative premium burger segment in the United States via 300 or so locations. Second, Yum Brands’ expertise in aggressively opening restaurants globally using a franchisee model should serve it very well in extracting value from the Habit deal. At the moment, Habit is a U.S.-focused hamburger concept with seven locations in Shanghai.
And lastly, Yum Brands is acquiring a profitable business in Habit that has seen its same-store sales strengthen the past six quarters amid improvements to the menu and operations.