Tricon adds A&W, Long John Silver's to its chain gang

The owner of Pizza Hut, Taco Bell and KFC restaurants in the United States is adding seafood and root beer floats to its corporate pantry of fast-food chains. Tricon Global Restaurants Inc. announced yesterday that it is buying Long John Silver's, the leader in fast-food seafood, and A&W All American Food Restaurants, which serves A&W root beer along with burgers and hot dogs, for $320-million (U.S.) in cash from privately held Yorkshire Global Restaurants.

The Globe and Mail
March 13, 2002

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Tricon adds A&W, Long John Silver's to its chain gang
Associated Press, with files from Reuters and CP.

LOUISVILLE, KY. — The owner of Pizza Hut, Taco Bell and KFC restaurants in the United States is adding seafood and root beer floats to its corporate pantry of fast-food chains.

Tricon Global Restaurants Inc. announced yesterday that it is buying Long John Silver's, the leader in fast-food seafood, and A&W All American Food Restaurants, which serves A&W root beer along with burgers and hot dogs, for $320-million (U.S.) in cash from privately held Yorkshire Global Restaurants.

Tricon also announced that it is proposing to change its corporate name to Yum Brands Inc., matching its New York Stock Exchange ticker symbol YUM.

The name change will be submitted for shareholder approval at the annual meeting in May.

Louisville-based Tricon has over 30,000 restaurants worldwide that generated more than $22-billion in system sales last year.

Yorkshire Global Restaurants, based in Lexington, Ky., was created in 1999 following the merger of Long John Silver's and A&W All American Food Restaurants. It had nearly $1.1-billion in system sales from 1,225 Long John Silver's and 970 A&W restaurants in 2001.

Long John Silver's is the largest fast-food seafood chain worldwide with $812-million in system sales. The A&W restaurant chain generates about $285-million in annual system sales.

The deal doesn't affect A&W Food Services Canada, which is independent from the U.S. company since the Canadian company bought the trademark rights for the brand in Canada in 1961.

The U.S. purchase could expand Tricon's efforts to attract more customers by combining restaurant brands at the same site.

Tricon already has 1,500 multibranded restaurants worldwide, and company executives say the acquisition of Long John Silver's and A&W will give fast-food consumers more choices.

In a conference call with analysts, chief executive officer David Novak said consumers tend to associate Pizza Hut exclusively with pizza and Taco Bell with Mexican food. "Every time we try to move into new categories it fails because we stand for so much for one thing," Mr. Novak said.

Tricon has already had a business relationship with Yorkshire, opening 83 KFC-A&W combinations, six KFC-Long John Silver's and three Taco Bell-Long John Silver's combinations since 2000.

The proposed acquisition drew a mixed response from Wall Street.

In afternoon trading on the New York Stock Exchange, Tricon shares fell 3.3 per cent, or $1.91 a share, to $55.60.

"Overall we'd characterize the transaction as a mild positive for Tricon," said Salomon Smith Barney analyst Mark Kalinowski. "Like Tricon's management, Yorkshire's management has long been a proponent of co-branded restaurants."

But Crowell Weedon analyst Doug Christopher called the acquisition a "modest negative."

"They had been moving ahead with three core concepts with great potential," he said, "and now they're talking about mixing things up with multibranding."


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