FDBusiness.com

McDonald’s Corporation is selling a controlling interest in its businesses in mainland China and Hong Kong to CITIC, CITIC Capital Holdings and The Carlyle Group for up to $2.08 billion (HK$16.14 billion) in cash and new shares. After completion of the transaction, CITIC and CITIC Capital will have a controlling stake of 52%, while Carlyle and McDonald’s will have interests of 28% and 20%, respectively. The new partnership, which will be responsible for McDonald’s businesses in mainland China and Hong Kong for a term of 20 years, will become the largest McDonald’s franchisee outside the United States.

The partnership will use its combined expertise and resources to accelerate growth in McDonald’s business through new restaurant openings, particularly in tier 3 and 4 cities, and to improve sales performance in existing restaurants. The focus will be on key areas such as menu innovation, enhanced restaurant convenience, retail digital leadership and delivery. It intends to add over 1,500 restaurants in China and Hong Kong over the next five years.

Steve Easterbrook, chief executive of McDonalds’s, says: “China and Hong Kong represent an enormous growth opportunity for McDonald’s. 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. 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.”

China’s consumer sector is growing rapidly, benefiting from continued urbanisation, an expanding middle class and increasing disposable household incomes. China’s working population is larger than those of the US and Europe combined, yet spending levels of China’s middle class are a small fraction of those in more developed countries. As disposable incomes rise, people will continue to spend more on leisure and dining out, particularly in tier 3 and 4 cities where there is great growth potential. As such, the market for Western Quick Service Restaurants is expected to continue to grow rapidly.