Pizza Hut’s largest franchise restaurant in the UK is set to agree a rescue deal that would save the vast majority of its UK outlets and jobs.
Sky News has learned that Directional Capital, an investment company which already controls much of Pizza Hut’s restaurant operations in Denmark and Sweden, is in advanced talks to acquire around 140 sites in the UK.
A deal, which could occur as early as Wednesday, would be structured as an acquisition of Heart With Smart (HWS), the main franchisee, by Directional Capital.
The financiers said there was a strong chance the transaction would be implemented via a pre-pack administration of HWS.
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They added, however, that an insolvency of the company would not lead to a significant number of site closures or job losses.
Only a handful of the chain’s existing outlets – at most – were at risk of being eliminated, they said.
HWS, previously called Pizza Hut Restaurants, employs around 3,000 people, making it one of the largest operators in the casual dining sector in Britain.
If completed, the deal would end the sales process that has been underway since Rachel Reeves’ budget at the end of October.
Insiders told Sky News in November that increases in employers’ national insurance contributions (NICs) coming into force in April would add around £4m to HWS’s annual cost base – the equivalent of more than half of last year’s earnings before interest, taxes and depreciation. and depreciation.
HWS licenses the Pizza Hut name to Yum! Brands, owner of KFC
HWS is owned by both Pricoa, a lender, and the company’s management, led by CEO Jens Hofma.
They led a management buyout worth £100m in 2018, with the business previously owned by Rutland Partners, a private equity firm.
HWS licenses the Pizza Hut name to Yum! Brands, the American food giant which also owns KFC.
Interpath Advisory oversaw the sales process.
Even before the budget, restaurateurs were feeling significant pressure, with TGI Fridays collapsing into administration before being sold to a consortium of Breal Capital and Calveton.
Sky News also revealed in the autumn that Pizza Express had hired investment bankers to advise it on a debt refinancing.
HWS operates all Pizza Hut restaurants in Britain, but has no stake in its many delivery outlets, which are run by individual franchisees.
Directional Capital, however, reportedly owns two Pizza Hut delivery franchisees in the UK.
Accounts filed at Companies House for HWS4 for the period from December 5, 2022 to December 3, 2023 show that it completed a debt restructuring under which its lenders agreed to suspend repayments on some of its borrowings until in November next year.
The terms of the same facilities have also been extended until September 2027, while it has also signed a new ten-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.
“Even though market conditions have improved significantly since 2022, consumers continue to face above-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.
He adds: “Business costs remain challenging. »
Pizza Hut opened its first restaurant in the UK in the early 1970s and expanded rapidly over the next 15 years.
In 2020, the company announced it was closing dozens of restaurants, resulting in the loss of hundreds of jobs, through a Company Voluntary Arrangement (CVA).
At that time it operated more than 240 sites across the UK.
HWS and Interpath declined to comment Monday evening, while Directional Capital could not be reached for comment.