Devyani International and Sapphire Foods India, which operate KFC and Pizza Hut quick service chains in India, are merging operations to create the country's largest single quick-service restaurant (QSR) entity, the two announced in separate stock exchange filings late on Thursday.
Sapphire Foods' merger with Devyani will result in a joint entity operating over 3,000 stores and comes into effect April 1.
Both firms are listed. As part of the proposed merger, Devyani will issue 177 shares for every 100 shares of Sapphire. Annual synergies of ?210- 225 crore are expected in the second full year of operations of the combined entity.
Devyani also holds Indian franchisee rights for global chains such as Costa Coffee, Tea Live, New York Fries and Sanook Kitchen. Its India brands include Vaango, The Food Street, Biryani By Kilo and Goila Butter Chicken, which it acquired from Sky Gate Hospitality.
Ravi Jaipuria, non-executive chairman of Devyani International, said the consolidation "marks a significant milestone, resulting in Devyani holding franchise rights across the entire Indian market for KFC and Pizza Hut brands." The merger also adds a strong international presence in Sri Lanka, which complements existing overseas operations, he said.
"This transaction reflects the strong partnership between Samara Capital Group and RJ Corp," said Sumeet Narang, nominee director of Sapphire Foods and founder of Samara Capital.
Across India and Sri Lanka, Sapphire Foods operates over 1,000 restaurants.
Full integration is expected to be completed within 15-18 months from the date of the merger, the filings said.
Arctic International, a group company, will acquire around 18.5% of Sapphire Foods' paid-up equity capital from existing promoters, with the option to later assign this stake to a mutually-agreed upon financial investor.
As part of the deal, Devyani will acquire 19 KFC restaurants currently operated by Yum! India in Hyderabad, and pay a one-time charge to Yum! India towards merger approval and the licence fee for the additional territory.
According to the companies, the merged entities will focus on accelerating KFC's expansion, revitalising Pizza Hut to drive sustainable long-term growth, and scaling up Devyani's emerging brands portfolio.