Industry News | March 11, 2002

Tricon to Acquire A&W Restaurants, Long John Silver's

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Tricon Global Restaurants today announced it has signed a definitive agreement to acquire Long John Silver's and A&W All American Food Restaurants, owned by Yorkshire Global Restaurants (YGR), for $320 million in cash. The acquisition is subject to regulatory approval and other customary closing conditions.

"One of our major strategies is to drive global growth by leading the way in multibranding innovation—offering the consumer two brands and more choice in one restaurant,'' said David C. Novak, Tricon Chairman and CEO. "We have tested and proven the unique power of offering the seafood category's leading quick service brand, Long John Silver's, and the heritage of A&W's all-American hamburgers, hot dogs, and legendary root beer floats to our existing KFCs and Taco Bells. Customers simply love the choice and convenience these combination restaurants offer. Our acquisition was based on proven test results that drove significant increases in average unit volumes and profits. We are confident multibranding is a key enabler for accelerating the renewal of our existing asset base and adding new units with excellent returns for our shareholders. We also expect a very successful integration given we have been working together for over two years, know the operations and will retain the top management and their core teams."

Tricon already has 1,500 multibranded restaurants generating $1.5 billion in annual system sales from KFC, Taco Bell, and Pizza Hut combinations. In 2000, Tricon entered into a license agreement with Yorkshire to test multibranding options. Since then, the two companies have opened 83 KFC/A&Ws, six KFC/Long John Silver's, and three Taco Bell/Long John Silver's. Results are extremely positive, with returns well above Tricon's cost of capital.

"One of the most positive aspects of the acquisition is we have strengthened our management team. Sid Feltenstein, the entrepreneur who saw the latent power of the A&W and Long John Silver's brands, and has led significant sales and profit increases, will continue to serve as the chief executive of both brands. Sid was named Entrepreneur of the Year in 2001 for the outstanding job he has done driving both Long John Silver's and A&W's base businesses. Both Sid and I are passionate about the stand-alone power of each of our individual brands, and see a huge opportunity to transform the quick-service industry with multibranding innovation,'' Novak said.

Feltenstein said, "By joining forces with Tricon, we believe Long John Silver's and A&W will become true national brands much more rapidly than if we remained a stand-alone company. We will also be able to capitalize on Tricon's strengths that we do not have now, and as a practical matter, could not dream of having for years to come, including human resource programs, purchasing power and far greater marketing and product development resources. This is a perfect win-win partnership for our systems.''

Additionally, Tricon announced it expects its first quarter on-going operating EPS will be at the high end of the previously disclosed range of $0.74 to $0.78. The company also reconfirmed its full year 2002 ongoing operating earnings forecast of $3.56 to $3.63 per share. Dave Deno, Tricon's CFO commented, "Due to the strength of Tricon's base business, the estimated dilutive impact of the acquisition of two cents per share in 2002 will be offset. We are pleased with the terms of our deal. The price we paid reflects the solid base business of Long John Silver's and A&W, modest cost synergies, and it does not factor in any of the multibranding upside we expect to achieve.''

Name Change

Tricon also announced it will change its corporate name to Yum! Brands, Inc.

"Yum! Brands better reflects our expanding portfolio of brands and the unique fun and recognition culture we are driving," Novak said. "It also represents our ticker symbol on the New York Stock Exchange, and reinforces our Customer Mania passion to put a 'Yum' on our customers faces all around the world.'' The name change is subject to approval of the company's shareholders, which is expected at its annual shareholders meeting on May 16, 2002.

Tricon Global Restaurants, Inc., based in Louisville, Kentucky, is the world's largest restaurant company in terms of system units with more than 30,000 restaurants in over 100 countries and territories. The company's brands—KFC, Pizza Hut, and Taco Bell—are the global leaders of the chicken, pizza, and Mexican-style restaurant categories, respectively. Total worldwide system sales for the brands were over $22 billion in 2001.

Based in Lexington, Kentucky, privately held Yorkshire Global Restaurants was created in 1999 following the merger of Long John Silver's and A&W All American Food Restaurants. The company ended 2001 with nearly $1.1 billion in system sales from 1,225 Long John Silver's (1,200 U.S./25 international) and 970 A&W (780 U.S./190 international) restaurants, including 121 multibranded Long John Silver's/A&W restaurants.