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Pizza Hut parent to buy operator of fast-casual Habit Burger in all-cash deal

Yum Brands to pay $375M for 270-unit burger chain

Yum Brands agreed to acquire The Habit Burger Grill, announced the parent of KFC, Taco Bell and Pizza Hut. The agreement to purchase the Habit Restaurants, Inc., operator of the fast-casual burger chain, values the deal at $375M. Yum Brands will pay $14 per share in cash for its first burger chain, pending customary regulatory approval and sign-off from the stockholders of both companies. The Irvine, Calif.-based chain’s Board already approved the deal unanimously. The sale to Yum Brands was recommended by a special committee of non-executive, independent directors.

The Habit Burger, with 270 locations, offers a menu of charburgers, hand-filleted and marinated chargrilled chicken sandwiches, sushi-grade chargrilled ahi tuna sandwiches, fresh salads, craveable sides and handmade frozen treats. Excluding Pizza Hut, the fast-casual concept will join what are mainly a collection of fast-food restaurants under the Yum Brands umbrella.

Yum Brands credits the development of the deal in part due to The Habit Burger’s high-growth potential and past performance. Company-store average unit volumes (AUVs) grew by 49.9 percent to $1.9 million between 2009 and 2018. Total units grew by a 28.4-percent compounded rate in the same period.

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A California-style burger concept with strong appeal

Executives at Yum Brands appreciate the chain’s California-style menu with a bounty of diversity. The Habit Burger provides a variety of proteins that are chargrilled and has a large loyal fan base. Transparency and QSR-like convenience are additional attributes that come to bear in the chain’s value proposition.

Russell Bendel, The Habit Burger Grill president and chief executive, noted recent investments in the chain’s delivery business, drive-thru technology, kiosks, and tech tools for its operators have improved the restaurant experience for guests. In addition, these same initiatives made the burger concept an attractive acquisition target.

Also, open kitchens, outdoor patios and interiors enhanced with natural light create a comfortable environment for guests and contribute to a 50/50 mix between lunch and dinner. Founded in 1969, the concept’s decor also boasts polished stone and hardwood accents in its stores. Furthermore, it was named Best Regional Fast Food in USA Today’s 2019 Best Readers’ Choice Awards.

Consummating The Habit Burger acquisition agreement

Yum Brands expects to complete the purchase of The Habit Grill by the end of this year’s second quarter. It also announced The Habit Burger Grill will remain headquartered in Irvine. In addition, Bendel, who will now report directly to David Gibbs, Yum Brands chief executive, will continue to manage the chain.

BofA Securities, Inc. acted as financial advisor and Mayer Brown LLP provided legal advice to Yum Brands in the transaction. Meanwhile, Piper Sandler Companies (formerly Piper Jaffray Companies) acted as financial advisor to The Habit Burger Grill and Ropes & Gray LLP acted as the restaurant company’s legal advisor. Yum will use its credit facilities and available cash on hand to fund the transaction.

Photo credit: Yum Brands

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