CHINA TOPIX

11/22/2024 01:55:43 am

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McDonald's Sells China Business to CITIC, Carlyle for $2.1B

McDonald's

(Photo : Getty Images) McDonald's sold off parts of its shares in China to CITIC capital and Carlyle Group.

Fast food guru McDonald's sold a great number of its market shares in China to two other firms, in a bid to expand its presence in the Chinese market. The deal that was announced on Monday was valued at $2.1 billion and highlighted Hong Kong's CITIC Capital and US Carlyle Group as the main investors.

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Reuters reported that once the regulatory commissions in China approve the transaction, CITIC will then own 52 percent of the partnership, Carlyle with 28 percent, and McDonald's for the remaining 20 percent.

Under the new ownership, the fast food firm plans to add a total of 1,500 branches in both China and Hong Kong over the next five years. Also, the current 2,400 branches in China and 249 in Hong Kong, which have over 120,000 employees will be re-franchised.

Under the agreement, McDonald's will not only get cash but also new shares in the market. The partnership is expected to last for 20 years, and during the period, the sales margin is expected to rise following a menu renovation, which is among other key focuses.

"As disposable income rises people will continue to spend more on leisure and on dining out," the announcement said. "The market for Western Quick Service Restaurants is expected to continue to grow rapidly."

Initially, McDonald's planned to sell off its entire shares to raise $3 billion. However, the fast food chain opted to keep a minority share of the firm while keeping in mind future plans.

Shaun Rein, the marketing director at China's Market Research Group, explained that not much was to be expected from the new partnership.

"McDonald's is a well-run company," Rein said. "I'm not sure that CITIC and Carlyle are able to add much more aside from capital."

McDonald's comes in second as the most common fast food joint in China next to Yum Brands' KFC, which has more than 5,000 local outlets in the mainland. USN news, however, noted that Yum Brands' KFC is still recovering from a scandal after it was found that some of its branches were serving expired meat.

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