Yum Brands said it intends to separate its China business into a publicly traded company, bowing to pressure from an activist shareholder. Yum's shares rose more than 6 percent in premarket trading on Tuesday. (Get the latest quote here.)

Yum China, the new entity, will become a franchise of Yum Brands in Mainland China and will pay a percentage of its sales to the parent company for exclusive rights to three of the company's brands - KFC, Pizza Hut and Taco Bell. Yum Brands will be led by its current Chief Executive Greg Creed and Yum China will be led by Micky Pant, who was named the CEO of the China business in August.

The plan to spin off Yum's China business comes days after activist investor Keith Meister, who has been pushing for a reorganization at the company, was appointed to its board. Meister's hedge fund Corvex Management owns nearly 5 percent of the company. The separation, which is expected to be completed by the end of 2016, is intended to be tax free to shareholders. The China business is expected to have no significant debt. Further details of the separation will be announced at the company's investor day on Dec. 10, Yum Brands said. Mark Kalinowski of Nomura Securities International sees the move as a positive one. "We view today's announcement as a large positive, as it will get YUM! Brands off of the China roller coaster in a meaningful way, and allow for better focus on enhancing non-China business lines (although more could and should be done)," he wrote in a note.