McDonald’s sells China operations to consortium for US$2.08 billion


AFP

BEIJING — U.S. fast-food giant McDonald’s will sell a controlling stake in its China and Hong Kong business for up to US$2.08 billion to a consortium including state-owned Citic and the Carlyle Group, it was announced Monday. The deal is part of an international turnaround plan by the Golden Arches as it struggles with sluggish growth at home. Citic Limited, Citic Capital Holdings, Carlyle Group and McDonald’s will form a company that will act as a franchisee for the chain’s business in mainland China and Hong Kong for 20 years, the companies said in a joint statement.

Citic is a vast Chinese state-owned conglomerate with interests in businesses ranging from energy and manufacturing to real estate.

It said in a statement to the Hong Kong Stock Exchange that the purchase would deepen its exposure to China’s consumer sector, “which is poised to be the main driver of China’s economy for decades to come.” The burger chain last year announced plans to sell its over 2,600 restaurants in China and Hong Kong, after sales took a hit as tensions in the South China Sea dented U.S. companies’ earnings in the country. Its China business also suffered a blow in 2014 after a food safety scandal involving one of its meat suppliers. The deal gives McDonald’s partners “who have an unmatched understanding of the local markets and bring enhanced capabilities,” CEO Steve Easterbrook said in the statement.

Citic and Citic Capital will have a stake of 52 percent, Carlyle will take 28 percent and McDonald’s will retain 20 percent of the new company. It will focus on growth in China’s smaller regional cities and plans to open more than 1,500 restaurants in the mainland and Hong Kong over the next five years.

“Citic and Carlyle’s resources will allow McDonald’s to expand rapidly and refurbish old restaurants, which is expensive to do,” Ben Cavender of China Market Research Group told Bloomberg News.

“Given that McDonald’s lags behind KFC in terms of store count in China, we can expect them to expand aggressively and invest heavily.”