For most, the new year is a time to focus on kicking various habits, not acquiring them.
Not so for Taco Bell, Pizza Hut and KFC owner Yum! Brands (YUM) - Get Report, which on Monday announced that it is acquiring Habit Restaurant’s (HABT) - Get Report char-grilled burger-and-fries speciality chain The Habit Burger Grill for $14 a share in cash, or about $375 million.
In this case, it is far from a bad habit. While The Habit Burger Grill is known for its burgers, fries and shakes, it is equally known for its “California” style approach to fast food – specifically its grilled-it approach to burgers, chicken and tuna, as well as other healthier options like salads.
It’s a relatively small but bold move for Yum!, which has spent the past three years transforming its brands and offerings to make them more enticing and to better compete with the likes of McDonalds, Chick-Fil-A, Popeye’s and others, and produce profits.
“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,” said Yum! Brands CEO David Gibbs.
Another benefit: The Habit Burger Grill’s recent deal with DoorDash, an area Yum! Brands has been looking to scale into with its other brands.
Yum! Brands said it expects the $375 million deal to have minimal impact to earnings per share before special items in 2020, with accretion beginning in 2021 and increasing after that.
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.
Habit Restaurants’ stock was up 32.49%, or $3.42 a share, at $13.92 in Monday trading.