Shares of KFC and Indian operator Pizza Hut Devyani jump following merger with rival franchisee Sapphire

Shares of KFC and Indian operator Pizza Hut Devyani International rose 5.3% after announcing plans to merge with rival franchisee Sapphire Foods India.

Yum! Brands owns fast food chains like KFC, Pizza Hut and Taco Bell, and operates them in India through franchise partners such as Devyani International, Sapphire Foods India and Burman Hospitality.

The deal would bring together the two main franchise operators of Yum! Brands in India into one entity, overseeing KFC and Pizza Hut in the country. Although Devyani International did not confirm the transaction amount, Reuters reported that the transaction was valued at $934 million.

Under the terms of the merger, Devyani International issue 117 shares for every 100 shares of Sapphire Foods India, the companies said in a press release.

Shares of Sapphire Foods India fell 6.4% at the open.

The merger is expected to take effect within 12 to 15 months, subject to regulatory and shareholder approval. The companies said the deal would accelerate KFC’s expansion in the country and help revitalize Pizza Hut, which trails market leader Domino’s by a wide margin.

“India is a priority market for us,” said Yum! Ranjith Roy, CFO of Brands. He added that the country had a lot of room for growth.

The proposed merger would result in accelerated expansion and create “greater value for both shareholders” through improved supply chain operations, it said.

Devyani International, the largest franchisee of Yum! Brands in India said it expects annual “synergies” of 2.1 billion to 2.2 billion rupees, or about $23 million to $25 million, starting in the second full year after the merger is completed.

Devyani operates over 2,000 quick service restaurants in over 280 cities across India, Nigeria, Nepal and Thailand. Meanwhile, Sapphire operates 529 KFC restaurants and 338 Pizza Hut restaurants in India, as well as 119 Pizza Hut restaurants and 11 Taco Bell restaurants in Sri Lanka, where it is the largest international fast food chain.

“India has the potential to become a true gem in Yum!’s global markets, and this announcement represents an important step in that journey,” said Sumeet Narang, Designated Director at Sapphire Foods India and founder of private equity firm Samara Capital.

India has the third highest concentration of Yum!Brand stores after the United States and China, according to the company’s latest financial report.