NEW YORK CITY, New York: Two of the largest names in the U.S. pizza market are moving closer to potential sales, as mounting cost pressures and slowing demand push owners to explore new ownership structures.
Papa John's International and Pizza Hut, owned by Yum Brands, are in separate negotiations that could result in both chains changing hands, according to people familiar with the matter. The discussions could ultimately lead to the companies going private, allowing management to restructure away from the pressures of public markets.
Papa John's shares have fallen sharply, dropping 28 percent over the past six months to about US$34.99. In March, the company received a $47-per-share offer from Qatari-backed Irth Capital, with support from Brookfield Asset Management, according to sources briefed on the talks.
Irth has been conducting due diligence for about a month, and some investors expect a deal could be reached around the time Papa John's reports quarterly earnings on May 7. However, the negotiations are ongoing, and no agreement is certain.
Meanwhile, Yum Brands has set a fresh deadline this week for potential buyers to submit formal bids for Pizza Hut. Private equity firms, including Sycamore Partners, Apollo Global Management, and LongRange Capital, are among those considering offers.
Yum could move to exclusive negotiations after the deadline, though it may also retain the business or spin it off if bids fall short of expectations. Representatives for Yum, Papa John's, Irth, Apollo, and Sycamore declined to comment.
The potential deals come as restaurant operators face a difficult environment, with consumers cutting back on spending and input costs rising due to food inflation.
"Public [quick service restaurant] stocks are under pressure as softer consumer demand collides with persistent structural cost headwinds," said Will Auchincloss, EY-Parthenon's Americas retail sector leader. "Traffic has weakened as consumers pull back, and at the same time, brands are navigating higher labor costs and a far more competitive value environment."
Papa John's has struggled with declining sales, leadership turnover, and heightened competition since founder John Schnatter's exit in 2018. Its stock peaked near $130 in late 2021 but has since fallen significantly.
Pizza Hut has also underperformed, weighing on Yum's earnings as sister brands Taco Bell and KFC have posted stronger results. Revamping aging locations and closing underperforming outlets are seen as key steps for any new owner.
Both chains have indicated plans to shutter hundreds of locations as part of broader turnaround efforts.
"For certain restaurant chains, being private offers flexibility to reset the business and invest through this cycle without the pressure of quarterly earnings," Auchincloss said.
The renewed interest in restaurant deals follows a rebound in corporate transactions and a series of take-private moves in the sector.
Papa John's CEO Todd Penegor, who took over in late 2024, said he remains focused on running the business despite ongoing speculation.
"I mean, it's been a constant, right? I've been in the role 18 months, and I think almost the full 18 months, we've always had some kind of rumor out there around the brand," he said.
