Advertisement

McDonald's is selling most of its China business as it plans to expand there

McDonald's is selling most of its China business as it plans to expand there
A customer walks past a statue of Ronald McDonald outside a McDonald's restaurant in Beijing in 2014. (Andy Wong / Associated Press)

Fast-food giant McDonald's Corp. is selling a controlling stake in its China business to a group of investors led by state-owned Chinese conglomerate Citic Ltd. in a deal worth up to $2.1 billion, the companies said Monday.

The transaction is part of a global business overhaul being carried out by the American company to keep up with changing tastes that have resulted in declining sales.

Advertisement

Under the terms of the deal, Citic and its investment management unit Citic Capital will acquire 52% of the business while another partner, the Washington-based private equity firm Carlyle Group, will own 28%. McDonald's will retain a 20% stake.

About two-thirds of the China operation's 2,640 outlets, including 240 in Hong Kong, that are now owned by McDonald's will be refranchised. The China business, which employs more than 120,000 people, is valued at up to $2.1 billion, according to the agreement.

Under McDonald's Chief Executive Steve Easterbook's restructuring plan launched in 2015, the company wants franchisees to take over more company-owned outlets, giving local managers more decision-making power to respond to Asian customers.

McDonald's is China's second-biggest fast-food company after Yum Brands' KFC, which has more than 5,000 locations. It has faced trouble recently in China after it was caught in a food safety scandal when a supplier was found selling expired meat.

McDonald's will get cash and new shares under the terms of the agreement, which is for 20 years.

The deal, which still needs approval from regulators, is expected to be completed by mid-2017.

Oak Brook, Ill.-based McDonald's and its partners plan to add 1,500 restaurants in China and Hong Kong over the next five years to capitalize on booming demand from the country's growing middle class, which has money to spend on eating out.

"As disposable incomes rise, people will continue to spend more on leisure and on dining out, and there is particularly great growth potential in tier three and four cities," the announcement said, referring to less-known provincial cities with large populations. "As such, the market for Western Quick Service Restaurants is expected to continue to grow rapidly."

ALSO

Advertisement
Advertisement