McDonald's storefront

McDonald’s agrees to sell China unit

Deal values business at up to $2.1 billion

McDonald’s Corp. has agreed to sell a majority stake in its business in China and Hong Kong to a consortium of groups in a deal valued at $2.1 billion, the company said on Sunday.

The Oak Brook, Ill.-based giant announced a partnership with CITIC Limited, CITIC Capital Holdings and The Carlyle Group to operate McDonald’s in the fast-growing country. CITIC will own a controlling, 52 percent stake in the partnership. Carlyle will own 28 percent and McDonald’s will hold 20 percent.

The new partnership plans to add more than 1,500 locations in China over the next five years. McDonald’s currently has 2,400 locations in China and 240 locations in Hong Kong.

“China and Hong Kong represent an enormous growth opportunity for McDonald’s,” CEO Steve Easterbrook said in a statement. “By working together, we will unlock even faster growth and be closer to the customers and communities we serve as McDonald’s works to be the leading quick service restaurant across the Chinese mainland and Hong Kong.”

McDonald’s has been working to refranchise its business globally to operate less than 5 percent of its 36,000 global locations, much like rivals Burger King, The Wendy’s Co., and Yum Brands Inc.

McDonald’s plans to sell 4,000 locations to franchisees by the end of 2018 to get to that level. 

Under this deal, McDonald’s will refranchise 1,750 locations that it owns in China and Hong Kong.

The sale also comes just three months after Yum Brands spun off its China location. Pressure to instill more local ownership in the country intensified in recent years after food safety issues there damaged western brands and led to same-store sales declines.

Yet McDonald’s is far behind Yum’s KFC in China, and hopes that this deal will spur development and growth there.

China is a vital global market, with the world’s largest population and a booming economy thanks to its growing middle class. The working population there is larger than that of the U.S. and Europe combined, though spending by the middle class there remains a small fraction of the size. McDonald’s is banking on that improving as disposable incomes rise.

CITIC is China’s largest conglomerate, operating various businesses in China and overseas. CITIC Capital is an alternative investment firm that manages more than $8 billion in capital. Carlyle is a huge global asset manager with $169 billion in assets under management.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

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