McDonald’s Corp. (NYSE: MCD) agreed to sell a majority state in its China and Hong Kong operations to a group of investors in a deal worth up to $2.1 billion.
Chinese state-backed conglomerate Citic Ltd., Citic Capital Holdings and Washington-based private equity firm The Carlyle Group will buy 80 percent of the holding, the company said in a statement on Monday. Citic and Citic Capital will own 52 percent of the business, while Carlyle will own 28 percent. The remaining 20 percent will be kept by McDonald.
"China and Hong Kong represent an enormous growth opportunity for McDonald's," said McDonald's CEO Steve Easterbrook. "This new partnership will combine one of the world's most powerful brands and our unparalleled quality standards with partners who have an unmatched understanding of the local markets and bring enhanced capabilities and new partnerships, all with a proven record of success."
The deal will help the company better compete with nimble rivals, including Yum China Holdings Inc., which operates the KFC and Pizza Hut brands in mainland China. Yum Brands! Inc. spun-off its Chinese operation late last year to revive sales in China.
“Citic and Carlyle’s resources will allow McDonald’s to expand rapidly and refurbish old restaurants, which is expensive to do,” said Ben Cavender, a Shanghai-based analyst at China Market Research Group. “Given that McDonald’s lags behind KFC in terms of store count in China, we can expect them to expand aggressively and invest heavily.”
McDonald’s said the new owner plans to add more than 1,500 restaurants over the next five years in China, where it currently has more than 2,400 outlets. It also said the restaurants will focus on areas such as menu innovations, retail digital leadership and delivery.