ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Friday, January 24, 1997 TAG: 9701240056
SECTION: BUSINESS PAGE: A-9 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
PepsiCo Inc. stock jumped nearly 9 percent Thursday on word the company is considering spinning off its sluggish restaurant business, which includes the KFC, Pizza Hut and Taco Bell fast-food chains.
A spinoff, which is a method of breaking up a business into separately owned parts, would narrow the company's focus to its very profitable Pepsi soft drink and Frito-Lay snack operations.
PepsiCo confirmed its board was meeting Thursday but declined comment on a report in The Wall Street Journal that the spinoff would be announced afterward.
But a source familiar with the matter, who spoke on condition of anonymity, said the spinoff was under consideration. He declined to say how it would be accomplished.
Wall Street reacted enthusiastically to the reports.
In Thursday's trading, PepsiCo's price was up $2.25 a share, closing at $34.25 on the New York Stock Exchange.
Some investors have pushed for a spinoff of the restaurant business since its profits have been disappointing. The restaurant industry overall has suffered because of intense competition and higher food costs.
In 1995, the restaurant business accounted for $11.3 billion in sales, or 37 percent of PepsiCo's total. Its soft drink business contributed $10.5 billion in sales, or 35 percent of the total, and the snack food business accounted for $8.5 billion in sales, or 28 percent.
But in terms of operating profits, the restaurants contributed only 14 percent of the total, while snack foods accounted for 45 percent and beverages 41 percent.
PepsiCo was created in 1965 in the merger of the Pepsi-Cola and Frito-Lay companies. It acquired Pizza Hut in 1977 and Taco Bell the next year. It bought Kentucky Fried Chicken in 1986.
The restaurant division had more than 28,500 outlets around the world at the end of 1995 including about 8,000 overseas.
LENGTH: Short : 45 linesby CNB