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Yum! Brands Picks Up Habit for $375 Million, Habit Shares Surge

Shares of Habit Restaurants surge after the parent of the KFC, Pizza Hut and Taco Bell brands said it is buying the restaurant chain for $14 a share in cash.

While most utilize the new year to focus on kicking various habits, Yum! Brands  (YUM) - Get Yum! Brands Inc. Report on Monday announced that it was picking up one: Hamburgers.

Shares of Habit Restaurants  (HABT) - Get Habit Restaurants, Inc. Class A Report surged more than 32% on Monday after the parent of the KFC, Pizza Hut and Taco Bell brands said it was buying the restaurant chain for $14 a share in cash, adding flame-grilled burgers as well as chargrilled chicken, tuna and other sandwiches to its roster of fast-food offerings.

“We’ve emerged from our three-year transformation stronger and in a better position to accelerate the growth of our existing brands and leverage our scale to unlock value from strategic acquisitions,” Yum! Brands CEO David Gibbs said in a statement.

“As a fast-casual concept with strong unit economics, The Habit Burger Grill is a fantastic addition to the Yum! family and has significant untapped growth potential in the U.S. and internationally,” he added.

The acquisition is yet another feather in Yum! Brands’ cap of food-chain offerings, which have broadened significantly in recent years amid ongoing acquisitions and general re-branding and expansion efforts, particularly at Taco Bell.

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Yum! Brands said it expects minimal impact to non-GAAP earnings per share before special items in 2020, with accretion beginning in 2021 and increasing after that.

Founded in 1969, the Habit Burger Grill operates nearly 300 company-owned and franchised restaurants across the U.S. as well as in China. It offers a diverse, “California-style” menu of freshly-prepared grilled items.

Chris Versace, Real Money contributor and co-manager of the Trifecta Stocks portfolio and Stocks Under $10, added Habit Restaurants to the portfolio last summer on expectations of the chain’s continued U.S. expansion efforts.

Still, Yum! Brands isn't generating quite the same flavor with analysts. 

The company's stock fell flat in December after Argus Research downgraded the stock to hold from buy, citing slowing sales and heightened competition from delivery services like GrubHub and UberEats  (UBER) - Get Uber Technologies Inc. Report and more general competition for KFC from the likes of Chick-fil-A and Popeyes. 

Shares of Habit were up 32.49%, or $3.42 a share, at $13.92. Shares of Yum! Brands, meantime, were down slightly at $101.74.