Pizza Hut restaurant operator races to finalise new ownership | Money News

The operator of nearly 150 Pizza Hut restaurants in the UK is in advanced talks with potential buyers as it races to wrap up a deal to secure its future.

Sky News has learnt that Heart With Smart (HWS), the US-owned brand’s biggest UK franchisee, is aiming to select a preferred bidder in January after weeks of talks with suitors.

Sources close to the process said a range of trade and financial buyers had expressed interest in acquiring a large stake in the dine-in chain.

In November, Sky News revealed that HWS had begun approaching potential bidders as it sought to mitigate the impact of tax hikes announced in the previous month’s Budget.

HWS, which operates roughly 140 Pizza Hut restaurants, is working with Interpath Advisory on the process.

The company, which was previously called Pizza Hut Restaurants, employs about 3,000 people, making it one of the most significant operators in Britain’s casual dining industry.

It is owned by a combination of Pricoa and the company’s management, led by chief executive Jens Hofma.

They led a management buyout reportedly worth £100m in 2018, with the business having previously been owned by Rutland Partners, a private equity firm.

HWS licenses the Pizza Hut name from Yum! Brands, the American food giant which also owns KFC.

Insiders told Sky News last month that the increases to the national living wage and employers’ national insurance contributions (NICs) unveiled in the budget by Rachel Reeves, the chancellor, would add approximately £4m to HWS’s annual costs – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.

The structure of a takeover or capital injection was unclear on Monday, although the last eight weeks have seen a string of bleak warnings from the hospitality industry.

Even before the budget, restaurant operators 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 during the autumn that Pizza Express had hired investment bankers to advise on a debt refinancing.

HWS operates all of Pizza Hut’s dine-in restaurants in Britain, but has no involvement with its large number of delivery outlets, which are run by individual franchisees.

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Accounts filed at Companies House for HWS4 for the period from 5 December 2022 to 3 December 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year.

The terms of the same facilities were also extended to September 2027, while it also signed a new 10-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.

“Whilst market conditions have improved noticeably since 2022, consumers remain challenged by higher-than-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.

It added: “The costs of business remain challenging.”

Pizza Hut opened its first UK restaurant in the early 1970s and expanded rapidly over the following 15 years.

In 2020, the company announced that it was closing dozens of restaurants, with 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 declined to comment.