Pizza Hut Selling a Small Slice of the Pie to Investors

Pizza Hut Inc. is expected to announce today that it has sold a small slice of its restaurants, most of them in California, to a group led by minority and female investors.

PacPizza, a new company formed by three investment groups, has purchased 149 Pizza Hut restaurants, which employ about 3,600 workers. The Pizza Huts will be refocused to better serve the minority communities in which the restaurants are situated, investors said.

The price was not disclosed, but sources close to the deal said it was between $30 million and $40 million.

Leading the deal is Frederick O. Terrell, recently hailed as one of the most powerful African Americans on Wall Street. A Yale graduate who grew up in La Puente, Terrell is co-founder of Provender Capital Group, a New York firm that makes direct investments in specialty finance companies and franchise operations. Provender is the general partner in PacPizza.

“With this deal, PacPizza has the advantage of being a larger organization, but we’re still nimble enough to focus on things important to some of these underserved neighborhoods,” where the Pizza Huts are located, said Terrell, 42, a former deputy to Los Angeles City Council President John Ferraro.

“A large proportion of these neighborhoods are made up of minority populations, and there is a chance here to speak to and serve these Asian American, African American and other communities,” with advertising and job creation, Terrell said.

While not a large purchase (PepsiCo still owns more than 7,700 Pizza Hut franchises), the acquisition spotlights the growing entrepreneurial climate in minority-owned businesses in California.

The deal is the largest purchase to date of Pizza Hut restaurants from the Dallas-based subsidiary of PepsiCo. Earlier this year, Purchase, N.Y.-based PepsiCo announced plans to spin off its Pizza Hut, KFC and Taco Bell restaurants to its shareholders in a publicly traded enterprise.

“PacPizza is not a minority opportunity per se, but I believe there are minority communities that will be served by PacPizza,” Terrell said. “Capital formation is critical to this cycle that creates jobs and helps educate our youth. And this cycle has been lacking in the African American communities and in many parts of America.”

Terrell co-founded Provender with Pilar Esperon, 37, a former director at CS First Boston. Co-investors are Scorpion Holdings of New York and James Gresset and Michael Long of L&G; Financial Holdings of Austin, Texas.

Long will serve at PacPizza’s new chief executive, and Louis M. Romanus Jr. will serve as president and chief operations officer. Romanus, a 20-year veteran of Pizza Hut, started as a part-time cook and rose to a senior operations position.

Terrell said PacPizza is poised to make additional acquisitions of other franchises not limited to pizza restaurants. Most of the Pizza Hut restaurants acquired in the deal are in California, with 16 in Oregon and four in Nevada. The restaurants in California are mainly in the northern part of the state.