Sky News reports that Directional Capital, an investment firm that already controls much of Pizza Hut’s dine-in operations in Denmark and Sweden, is in advanced talks to acquire Heart with Smart (HwS), the operator of Pizza Hut Restaurants in the UK.
It comes after HwS brought in advisers from Interpath Advisory to find new investors or a buyer for the group back in November.
Financiers say there is a strong possibility the transaction will be implemented through a pre-pack administration of HwS.
However, the acquisition is not expected to lead to substantial numbers of site closures or job losses with only a handful or so of the chain’s existing restaurants at risk of being axed.
There are currently 140 Pizza Hut Restaurants in the UK, according to its website.
In August last year, auditors warned of ‘uncertainty’ over HwS’s future despite the group turning around a £3m loss in 2022 to report a £1.75m operating profit in 2023.
The group confirmed at the time that it had completed a significant restructuring of its debt and equity, which it said would provide a ‘strong foundation for future growth’.
It added that it is not forecasting to breach its covenant levels other than in a ‘severe but plausible’ downside scenario in which in guest demand declined sharply in the summer of 2024 before stabilising in October.
As a result of this, PwC noted in its auditor’s report that this ‘indicates the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern’.
Insiders previously told Sky News that the increases to the National Living Wage and National Insurance contributions (NICs) for employers unveiled by Chancellor Rachel Reeves in her Autumn Budget would add approximately £4m to HwS’s annual costs.
One added that the Pizza Hut Restaurants' operation needed additional funding to mitigate the impact of the Budget and put the business on a sustainable financial footing.
Pizza Hut Restaurants is the dine in arm of Pizza Hut in the UK and is an entirely separate entity to Pizza Hut Delivery, which is owned by Yum! Brands.
According to Sky News, Directional Capital is understood to own two of Pizza Hut’s UK delivery franchisees.
