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Friday, September 2, 2016, 17:50

CITIC, Carlyle 'team up' for McDonald's N Asia bid

By Reuters

CITIC, Carlyle 'team up' for McDonald's N Asia bid
People pass by a McDonald's restaurant on July 28, 2014 in Shanghai. (AFP PHOTO / JOHANNES EISELE)

HONG KONG - Private equity firms Carlyle Group and TPG Capital have teamed up with two separate Chinese state companies to bid for McDonald's outlets in the Chinese mainland and Hong Kong in a deal worth between US$2 billion and US$3 billion, four people familiar with the matter said.

The sources said the global buyout firms are pairing up with strategic bidders that more closely fit the profile McDonald's has said it is looking for; long-term partners, rather than private equity firms, which typically cash out after a few years.

Carlyle is working with Chinese state conglomerate CITIC Group, and TPG has joined hands with Beijing Capital Agribusiness Group, to place binding bids ahead of the mid-September deadline, the people added. Beijing Capital Agribusiness is McDonald's current China partner.

Carlyle and TPG would have a large minority stake in their respective consortium, one of the people said.

Reuters previously reported that the Illinois-based fast-food giant, which has been hit by a series of food-supply scandals in the Chinese mainland, had hired Morgan Stanley to run the sale of about 2,800 restaurants in mainland, Hong Kong and South Korea.

The two private equity-backed groups are only bidding for mainland and Hong Kong outlets and will be pitted against China Cinda Asset Management Co, Beijing Tourism Group and private Chinese technology and real estate firm Sanpower Group, one of the people added.

The Chinese mainland and Hong Kong account for more than 85 percent of the total 2,800 outlets up for grabs.

Separately, South Korea's Maeil Dairy Industry Co Ltd said it was considering bidding for McDonald's local outlets, which are expected to fetch about US$268 million. The company declined to say whether it would seek a partner, but a South Korean media report said Maeil was likely to link up with Carlyle.

CJ Corp and NHN Entertainment Corp were among the other South Korean companies that have previously shown interest in the fast food giant's business in the country.

McDonald's is switching to a less capital-intensive franchise model and is offering a 20-year franchise to buyers, with a 10-year extension option.

The franchise model has also been adopted by other fast-food operators, including arch rival Yum Brands, which licences KFC and Pizza Hut outlets.

Carlyle, TPG, Sanpower and Cinda declined to comment, and CITIC and Beijing Capital Agribusiness Group did not reply to requests for comment.

A McDonald's spokeswoman said no decisions had been made.

"We are making progress as we look for long-term strategic partners with local relevance ... and who share our values and vision with a dedicated focus on accelerating growth initiatives," she said.

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