McDonald's sells majority of its China and Hong Kong business for £1.4bn

Fast-food giant to offload 80 per cent of the division to investment company backed by Beijing as well as US private equity group Carlyle

Ben Chapman
Monday 09 January 2017 13:54
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McDonald's mploys more than 120,000 people in China and has more than 2,400 restaurants on the mainland and 240 in Hong Kong
McDonald's mploys more than 120,000 people in China and has more than 2,400 restaurants on the mainland and 240 in Hong Kong

McDonald's is selling a controlling stake in its China and Hong Kong business for $1.7bn (£1.4bn), the fast food giant announced on Monday.

State-backed Chinese conglomerate Citic will acquire 52 per cent of the business with US private equity firm Carlyle Group taking a further 28 per cent. The deal values the business at up to $2.1bn.

McDonald's will keep the remaining 20 per cent of the business which employs more than 120,000 people and comprises more than 2,400 restaurants in mainland China and 240 in Hong Kong. The deal requires approval from regulators but is expected to be completed by mid-2017.

McDonald's plans to open a further 1,500 restaurants in China and Hong Kong over the next five years to cash in on soaring demand.

Fast-food firms including McDonald’s rival Yum China, which operates the KFC and Pizza Hut brands in the mainland, are among retailers that are trying to fend off domestic competition and attract middle-class Chinese consumers who increasingly demand high-quality and healthier dining options.

As McDonald’s streamlines its sprawling global operations, it is also looking at further deals in markets such as South Korea, Japan and Southeast Asia.

"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," McDonald’s' announcement said, referring to provincial cities with large populations. "As such, the market for Western quick service restaurants is expected to continue to grow rapidly."

McDonald’s chief executive Steve Easterbrook is pursuing a turnaround plan to revive the company as it faces the fourth consecutive year of traffic declines in the US, its largest market. The China deal combines McDonald’s with partners “who have an unmatched understanding of the local markets and bring enhanced capabilities and new partnerships,” he said in the statement.

Additional reporting by Bloomberg

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