Yum! Brands Inc. (NYSE:YUM) has signed a definitive agreement to buy Habit Restaurants Inc. (NASDAQ:HABT) for $375 million. This move will enable YUM Brands to expand its reach to more customers. Although it’s entering a competitive space, it can nonetheless leverage its knowledge of its customers to establish new Habit Locations.
Yum Brands adds The Habit Burger Grill to its portfolio
The Habit Burger Grill is a unique fast-casual concept with over 300 locations in the US and China. In recent years The Habit Burger has been adding to its menu complementing its burgers with chicken, steak as well as ahi tuna sandwiches.
David Gibbs, the CEO of Yum Brands, stated that as a fast-casual concept, The Habit Burger Grill will be a huge addition to their family. He added its strong unit economics and significant untapped market potential in the US and abroad will be a massive opportunity for Yum. Currently, Yum Brands has KFC, Pizza Hut, and Taco Bell brands under its portfolio.
Gibbs said that The Habit Burger offers quality burgers compared to traditional fast-food chains at a good price. The Habit’s modern strategy to attract customers has been mainly a result of its modern restaurant design that has offered a balanced mix of 50% dinner and lunch. Similarly, it has been boosting customer experience by having a mobile app, restaurant kiosks, online ordering and delivery partnerships, drive-thrus, as well as other tech-centric solutions.
Deal to close in Q2 of 2020
Yum! Brands will complete the transaction in the second quarter of 2020 at a purchase price of $14 per share. This is a 33% premium on the closing price of Habit Restaurant on January 3, 2020. Most importantly, Yum Brands will fund the transaction through cash on hand, as well as borrowing.
This move will benefit Habit as it will be able to open either standalone locations or capitalize on the multiunit Yum locations. Therefore this will allow for rapid and well-thought expansion. For Yum, they receive a product line with positive recognition to supplement its offerings.