Pizza Hut's biggest UK restaurant franchisee is close to securing a deal that will preserve the majority of its British sites and jobs.
Sky News has learned that Directional Capital, a firm that already controls most of Pizza Hut's dine-in outlets in Denmark and Sweden, is in advanced discussions to acquire around 140 locations in the UK.
A deal, due as soon as Wednesday, would be structured as an acquisition of Heart With Smart (HWS), the main franchise holder, by Directional Capital.
Financiers stated there was a substantial likelihood the deal would be carried out through a pre-pack administration of HWS.
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They pointed out nonetheless that a corporate entity going insolvent would not result in large numbers of site closures or redundancies.
It was stated that at most, just a small number of the existing outlets belonging to the chain were at risk of being closed.
HWS, which was previously called Pizza Hut Restaurants, employs around 3,000 individuals, making it one of the largest players in Britain's casual dining sector.
If completed, a deal would bring a successful conclusion to a sale process that has been underway since the aftermath of Rachel Reeves's Budget in late October.
Insiders informed Sky News in November that the planned rise in employers' national insurance contributions (NICs) set to come into force in April would add approximately £4 million to HWS's annual expenditure base - a sum equivalent to over half of last year's pre-tax earnings, excluding depreciation and amortisation.
HWS is owned by a joint partnership between Pricoa, a funding provider, and the company's leadership team, managed by chief executive Jens Hofma.
They led a management buyout reportedly worth £100 million in 2018, with the business having been previously owned by Rutland Partners, a private equity firm.
HWS - Holroyd Weiss Stores Limited, the UK operator of Pizza Hut outlets, has a licence from Yum! Brands, the major American food company which also owns KFC.
Interpath Advisory has been overseeing the sale process.
Even before the Budget, restaurant operators were under severe pressure, with TGI Fridays having gone into administration before being sold to a consortium consisting of Breal Capital and Calveton.
Sky News also reported in the autumn that Pizza Express had taken on investment bankers to provide advice on restructuring debt.
Highway West Restaurants operates all of Pizza Hut's table service restaurants in the UK, but has no involvement with its many delivery branches, which are managed by separate franchise holders.
Directional Capital is reportedly the owner of two Pizza Hut delivery franchises in the UK.
Documents lodged with Companies House for the period from December 5, 2022 to December 3, 2023 reveal that HWS4 carried out a debt restructuring deal under which its lenders consented to postponing repayments on certain borrowings until November next year.
The terms for the same facilities were also extended until September 2027, and it also entered into a new ten-year Pizza Hut franchise agreement with Yum Brands, which expires in 2032.
The market situation has actually improved a fair bit since 2022, but despite this people are continuing to face numerous challenges, including persistently high inflation rates, high mortgage payments and sluggish economic growth.
It added: "The difficulties facing business remain significant."
Pizza Hut launched its first site in the UK in the early 1970s and expanded speedily over the subsequent 15 years.
In 2020, the company declared that it was shutting several restaurants, resulting in the loss of numerous employment opportunities, through a company voluntary arrangement (CVA).
At that point in time, it operated more than 240 sites throughout the UK.
HWS and Interpath declined to comment on Monday evening. Directional Capital were unable to be contacted for a comment.
