Yum China Holdings Inc. (Yum China (YUMC)) said Tuesday it has agreed to buy the Pizza Hut brand in mainland China from Yum! Brands Inc. (Yum! Brands (YUM)) for $1.2 billion in cash. The move turns Yum China from a licensee into the brand owner, giving it more control over one of the country's biggest pizza chains.

The deal is expected to close in the third quarter of 2026. Once it does, Pizza Hut China will stop paying licensing fees to Yum! Brands. Yum China says the acquisition will give it greater flexibility to expand the brand while improving restaurant economics and profitability.

“Moving from the exclusive licensee to the brand owner of Pizza Hut in Mainland China represents a transformative milestone for us, demonstrating our conviction and long-term commitment to the China market,” CEO Joey Wat said. “Becoming the brand owner will give the company greater strategic flexibility to drive innovation across the menu, store formats, new modules, and operations.”

Pizza Hut China is a big business. It generated $2.3 billion in revenue and $183 million in operating profit in 2025. As of March 31, 2026, it operated 4,375 restaurants across more than 1,100 cities. Yum China plans to expand the brand to more than 6,000 stores by 2028 and double its operating profit by 2029 compared with 2024.

Yum China said its 2026 financial guidance remains unchanged. The company expects the transaction to immediately improve restaurant margins and operating margins, and become accretive to diluted earnings per share after closing in 2026. It also projects mid-single-digit EPS accretion in 2027 and 2028.

The acquisition will be financed with a mix of cash and debt. Yum China said it remains committed to returning $1.5 billion to shareholders in 2026 and about 100% of annual free cash flow, after minority dividends, beginning in 2027.

The company added that it will continue working with Yum! Brands to expand KFC China, which is targeting more than 17,000 stores by 2028. Lazard served as financial adviser, while Sidley Austin LLP and Fangda Partners acted as legal counsel.

As of Tuesday's publication, Yum China shares were down 0.82% at $43.88.