Pizza Hut’s biggest UK restaurant franchisee is closing in on a rescue deal that would salvage the vast majority of its British outlets and jobs.
Sky News has learnt that Directional Capital, an investment firm which already controls much of Pizza Hut’s dine-in operations in Denmark and Sweden, is in advanced talks to acquire roughly 140 sites in the UK.
A deal, which could come as early as Wednesday, would be structured as an acquisition of Heart With Smart (HWS), the main franchise-holder, by Directional Capital.
Financiers said there was a strong possibility the transaction would be implemented through a pre-pack administration of HWS.
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They added, however, that an insolvency of the corporate entity would not lead to substantial numbers of site closures or job losses.
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Only a handful or so of the chain’s existing outlets – at most – were at risk of being axed, they said.
HWS, 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.
If completed, a deal would bring a successful end to a sale process which has been running since the aftermath of Rachel Reeves’s budget in late October.
Insiders told Sky News in November that increases to employers’ national insurance contributions (NICs) which come into effect in April would add approximately £4m to HWS’s annual cost-base – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.
HWS is owned by a combination of Pricoa, a lender, 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 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.
Interpath Advisory has been overseeing the sale process.
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.
Directional Capital, however, is understood to own two of Pizza Hut’s UK delivery franchisees.
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Accounts filed at Companies House for HWS4 for the period from December 5, 2022 to December 3, 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 ten-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.”
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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 and Interpath declined to comment on Monday evening, while Directional Capital could not be reached for comment.
