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Yum! Brands is spinning off its struggling Chinese business

TIANJIN, CHINA - 2015/02/21: A KFC restaurant hangs up China's national flags in lunar new year.  KFC restaurants in China will start selling freshly ground coffee in 2015 to become a lower-cost “premium” alternative to Starbucks. The initiative began earlier this year and is expected to perform in 2,500 KFCs in China by the end of this year. (Photo by Zhang Peng/LightRocket via Getty Images)TIANJIN, CHINA - 2015/02/21: A KFC restaurant hangs up China's national flags in lunar new year.  KFC restaurants in China will start selling freshly ground coffee in 2015 to become a lower-cost “premium” alternative to Starbucks. The initiative began earlier this year and is expected to perform in 2,500 KFCs in China by the end of this year. (Photo by Zhang Peng/LightRocket via Getty Images)
A KFC restaurant hangs up China's national flags in lunar new year.Photograph by Zhang Peng — Getty Images

Yum! Brands Inc., the owner of fast-food restaurants KFC and Pizza Hut, is to spin its China business off into a separate, publicly traded company, according to Bloomberg.

The new company, which accounts for more than half of today’s group revenue, will be led by Micky Pant, who was named the China unit’s chief executive officer in August, the agency said.

The news has been expected since last week, when Yum announced that activist investor Keith Meister, who had openly campaigned for such a split, has joined its board, after accumulating a stake of nearly 5% in the company through his investment firm Corvex Management LP.

The company has struggled in China since a tainted food scandal last year, and profits in the world’s second-largest market are expected to be stagnant this year, and may well be negative once foreign exchange rates are factored in.

Same-store sales at KFC in China are expected to grow by less than 4% year-on-year in the fourth quarter, the company said last week. Ironically, though, it’s Pizza Hut which is now faring worse in the world’s second-largest economy. Same-store sales there are expected to down on the year.

The move is a radical break for the company after nearly 30 years operating in China. One of the first western restaurant chains to exploit the country’s economic opening, KFC now has over 5,000 restaurants there. Pizza Hut, which first opened in China in 1990, has nearly 1,400 restaurants there.