McD sells most of China, HK business

HONG KONG: McDonald’s Corp has agreed to sell the bulk of its China and Hong Kong business to state-backed conglomerate CITIC Ltd and Carlyle Group LP for up to US$2.1 billion (RM9.4 billion), as it seeks to expand rapidly without using much of its own capital.

The 20-year deal caps months of negotiations between the fast-food chain, private equity firms including Carlyle and TPG Capital Management LP as well as several Chinese suitors.

The US fast food chain said local partners will help speed up growth in the world’s No. 2 economy through new restaurant openings, particularly in smaller cities that are expected to benefit from increased urbanisation and income growth.

“McDonald’s globally overall is struggling and didn’t have the money or intellectual resources to focus on China,” said Shaun Rein, managing director at China Market Research Group.

The company has more than 2,400 restaurants in mainland China and roughly 240 in Hong Kong. The new partnership plans to add 1,500 in the two areas over the next five years.

Under the deal, Hong Kong-listed CITIC Ltd will own about 32% of the business, with CITIC Capital, an affiliate company that manages private equity funds and other alternative assets, holding another 20%.

Carlyle will control 28% of the business, while McDonald’s will retain a 20% stake, the companies said in a statement. The deal will be settled in cash and in shares in the new company that will act as the master franchisee for the 20-year period.

McDonald’s originally wanted to raise up to US$3 billion from the sale of the business, but later decided to keep a minority stake to benefit from exposure to future growth in China, a person with direct knowledge of the plans previously told Reuters.