McDonald’s sells its China operations for $2.1 billion

The Dollar Business Bureau

Global fast food giant McDonald’s Corp. has agreed to sell its controlling stake of China and Hong Kong operations to a group of investors for about $1.7 billion.

McDonald’s took the latest decision after it failed to catch up with local rivals. According to a statement, Chinese conglomerate Citic Ltd., Citic Capital Holdings and U.S. private equity major Carlyle Group LP will acquire 80% stake for as much as $2.08 billion. These state-backed owners plan to add over 1,500 restaurants till 2021 in smaller Chinese cities.

Under the deal, Citic Ltd. and Citic Capital Partners will jointly hold a 52% stake, while Carlyle will hold 28%. Illinois-based McDonald’s Oak Brook will keep the remaining 20% stake.

As part of McDonald’s global expansion strategy, the company is exploring further deals in other Asian markets including South Korea, Japan and Southeast Asia.

McDonald’s currently has more than 2,400 outlets in mainland China and is looking to add about 300 stores each year. Yum China Holdings Inc., which has the KFC and Pizza Hut brands in mainland China, operates 600 stores, while Starbucks Corp. has 500 restaurants in mainland China.

Last March, McDonald’s announced it was seeking strategic partners in Asia and was committed to re-franchising 4,000 restaurants by 2018 end.

McDonald’s has been making efforts to fend off growing competition from the local food chains like Ting Hsin International Group’s Dicos eateries and Yum China, and attract middle-class consumers who demand high-quality and healthier dining options.

The new partnership will also focus on areas such as menu innovation, retail digital leadership and delivery, the statement said.