If you are an investor in KFC or Pizza Hut, then missing this update can be costly. On January 1, Sapphire Foods and Devyani International announced a mega merger, which could create a market leader in India’s QSR (Quick Service Restaurant) space.

There will be a share-swap in this deal—for every 100 shares of Sapphire Foods, 177 Devyani shares will be available. Record date has not been announced yet, so it is important for investors to remain alert. Yum! Brands has given green signal to this consolidation and Devyani will also acquire 19 KFC outlets in Hyderabad.

According to the company, the merger will improve margins, streamline operations and an annual synergy of ₹210–225 crore is possible from the second full year. This deal can prove to be truly game-changing for long-term investors.

Stock to watch: Shares of Sapphire Foods India Limited and Devyani International Limited will be in focus today because on Thursday, the first day of the year, both the companies announced a big merger. They say they will merge their operations to create the country’s largest single quick service restaurant chain.

These companies run franchises of KFC and PizzaHut in the country. In such a situation, the coming together of operators of KFC and Pizza Hut outlets through this deal will give a new direction to the fast food sector in India.

Strong rise in shares

In the same sequence, shares of Devyani International were seen trading up by Rs 5.37 or 3.64 percent at Rs 152.80 in early trading at 9:39 am. On the contrary, shares of Sapphire Foods India were seen trading down by Rs 8.75 or 3.33 percent at Rs 253.95. Under this merger plan, 18.5 percent stake of Sapphire Foods India will be sold to Arctic International, the promoter entity of Devyani. This will be completed before the merger.

The process of merging the two companies will start from April 1, which is currently subject to regulatory approval and shareholders’ approval. If everything goes well and both the companies merge, it will become the country’s largest quick service restaurant operator under a single company, which together will operate more than 3,000 restaurants in India and overseas markets.

In what ratio will the shares be divided?

This entire process of merger may take 15 to 18 months. Both Sapphire Foods and Devyani International are partner companies of the leading American food company Yum Brands, which owns brands like KFC, Pizzahut and Taccobel. Of these, Devyani and Sapphire Food operate KFC and Pizza Hut in India, which compete with Westlife Foodworld and Jubilant Foodworks, which are operators of McDonald’s and Domino’s Pizza in India. After the merger, Sapphire Foods will join Devyani International. Under the merger plan, shareholders of Sapphire Foods India Limited will get 177 shares of Devyani for every 100 shares held by them.

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