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| This file photo taken on Sept 10, 2016 showsa McDonald's restaurant in Gettysburg, Pennsylvania. US fast-food giant McDonald's wil l sell its mainland China and Hong Kong franchise business to a consortium of Citic Group and the Carlyle Group for up to US$2.08 billion, the companies said Jan 9, 2017. (Karen Bleier / AFP) |
McDonald’s Corp. has entered an agreement to sell 80 percent of its operations in China and Hong Kong to a consortium including Citic Ltd. and Carlyle Group LP.
The Chinese state-backed conglomerate and Citic Capital Partners will jointly take a 52 percent stake, while Carlyle will hold 28 percent and McDonald’s will retain a 20 percent shareholding
The deal, which includes 20-year mass franchise rights, will value the business at as much as US$2.08 billion, Citic said in a statement to the Hong Kong exchange Monday. The Chinese state-backed conglomerate and Citic Capital Partners will jointly take a 52 percent stake, while Carlyle will hold 28 percent and McDonald’s will retain a 20 percent shareholding, according to the statement.
Oak Brook, Illinois-based McDonald’s is revamping its ownership structure in markets such as China, South Korea and Southeast Asia as the world’s biggest restaurant chain attempts to streamline its sprawling global operations. Chief Executive Officer Steve Easterbrook is pursuing a turnaround plan to revive the company as it faces the fourth straight year of traffic declines in the US, its largest market.
The months-long auction process drew interest from international private equity funds and local companies. In October, people with knowledge of the matter said TPG Capital had exited the race, leaving its erstwhile partner, Chinese grocery operator Wumart Stores Inc., to compete against Carlyle and Citic. Bain Capital had also teamed up with Chinese hotelier GreenTree Hospitality for a bid, the people said at the time.
McDonald’s said in March it’s seeking strategic partners to help it add more than 1,500 restaurants in China, Hong Kong and Korea over the next five years. It has more than 2,800 restaurants in those locations, the majority of which are company-owned. Its long-term target is to have 95 percent of its international outlets owned by franchisees.
US restaurant chains have seen their market lead in China challenged by a growing line-up of Asian competitors such as Ting Hsin International Group’s Dicos eateries. The seller of Big Macs is also playing catch-up to Yum China Holdings Inc., its main fast-food competitor in Asia’s largest economy. The Chinese KFC operator spun off from its US parent Yum! Brands Inc. Nov 1, and has a carte blanche opportunity to pursue growth and add 600 restaurants a year in the country, Chief Executive Officer Micky Pant has said.
JPMorgan Chase & Co. advised the buyer consortium on the purchase, according to Monday’s exchange filing. Citic CLSA Capital Markets Ltd. advised Citic on the deal, while Citic Securities Co. acted as the conglomerate’s financial adviser in China, the filing shows.
