Yum! Brands to Acquire Dragontail Systems to Enhance Global Delivery

Yum! Brands (YUM) is acquiring Dragontail Systems Limited as it seeks to enhance its global delivery capabilities. The acquisition will also allow the company to integrate new technology talent. Additionally, it should be able to scale Dragontail’s artificial intelligence (AI) order management and delivery technology globally.

Under the terms of the deal, Yum! Brands is to pay A$93.5 million in cash. The acquisition should close in the third quarter, subject to Australian Federal Court approval. Dragontail shareholders will also have to authorize the takeover.

With the acquisition, Yum! Brands will gain access to a unique delivery platform designed to optimize and manage the entire food preparation process. Dragontail’s AI-based solution automates kitchen flow and the process of dispensing deliveries. In addition, the order flow system allows consumers to track their orders once payment is made. (See Yum! Brands stock analysis on TipRanks)

“With Dragontail, we expect to tap into the power of AI to accelerate and further enhance our delivery technology capabilities, especially at Pizza Hut, and optimize the end-to-end food preparation process,” said CFO Chris Turner.

While Dragontail’s platform is currently on offer in 10 countries, Yum! Brands intends to scale it and offer it worldwide once the deal closes. Completion of the transaction will bring to three the number of acquisitions the restaurant chain has made this year.

In addition to the acquisition, Yum! Brands is poised for tremendous growth in Latin America, reports Investing.com. Through the Pizza Hut brand, the pie purveyor sees solid growth south of the border, with stores more than doubling.

According to Investing.com, Pizza Hut opened its 1000th location in Guadalajara as the expansion in Latin America gathers pace. Plans to open and renovate more locations are in different stages of development.

Cowen analyst Andrew Charles has affirmed Yum! Brands’ bright outlook with comparable store sales expected to grow on the back of accelerated store development.

Charles stated, “We believe the brand has room to sustain digital’s momentum to further enhance unit economics (described as 3-5 year cash paybacks) and accelerate development to ~6% annually in 2022 & beyond for a brand that skews to emerging markets.”

The analyst has since reiterated a Hold rating on the stock with a $116 price target implying 3.41% downside potential to current levels.

Consensus among analysts on Wall Street is a Moderate Buy based on 8 Buy and 9 Hold ratings. The average analyst price target of $124.27 implies 3.48% upside potential to current levels.

YUM scores a “Perfect 10” on TipRanks’ Smart Score rating system, suggesting it is likely to outperform the overall market.

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