Hedgie Says Yum! Brands Inc. Should Spin Off China Unit

Yum! Brands Inc.

could add about 40 percent to its share price by spinning off operations in China, a hedge fund manager said Monday. Keith Meister, head of the $8 billion Corvex Management, made the comment at the Sohn Investment Conference in New York. Corvex is one of Yum's five largest shareholders, according to Meister, who said Yum is the second-largest investment ever made by his firm. Yum's shares could hit $130 if the company spun out its China operations, according to Meister. Yum shares are up about 26 percent in the year to date, and changed hands recently at $91.47, off 0.43. Yum's China unit accounted for about 52 percent of the company's $13.28 billion in 2014 revenue, according to its most recent annual report. Yum operates about 6,751 restaurants in China, mostly KFC and Pizza Hut, out of a total of more than 40,000 restaurants in about 125 countries. Meister's comments come after Daniel S. Loeb's Third Point LLC reportedly told its investors Friday that the fund had taken "a significant stake" in Yum. Loeb said Yum is "on the road to recovery" and didn't advocate a spin-off. Yum got hit by a food scandal in China last summer that hurt sales there. Same-store sales in China fell 12 percent in the first quarter, compared with a decline of more than 14 percent Wall Street had expected. Following last month's earnings report, Bank of America analyst Joseph T. Buckley reiterated a Neutral rating on Yum and $88 target. Recent investor focus on Yum has been "more restructuring-driven" Buckley said at the time. "But there was no hint of restructuring" from management on its call with analysts, Buckley said.