On Monday, McDonald’s announced its intention to purchase the 28% stake in a partnership overseeing its operations in mainland China, Hong Kong, and Macau, currently held by investment firm Carlyle. This move is part of the burger chain’s strategy to streamline its organizational structure in the region.
The agreement will enable McDonald’s to increase its ownership to 48%, while a consortium led by the state-backed conglomerate CITIC Ltd will retain control with a 52% stake in the business.
In April, Reuters disclosed that Carlyle was in discussions with financial advisers regarding its stake in McDonald’s China. The options being explored included the possibility of establishing a continuation fund for the asset.
McDonald’s CEO, Chris Kempczinski, stated that seizing the advantages of China’s long-term potential makes it an opportune moment to streamline the company’s structure.
The move follows nearly six years after McDonald’s agreed to divest 80% of its China and Hong Kong businesses for up to $2.1 billion to CITIC Ltd, its investment arm CITIC Capital, and Carlyle. This recent announcement signifies a noteworthy shift in the company’s ownership structure within the region.
In its fastest-growing region, where McDonald’s currently operates 5,500 stores, the company has been expanding its market share. This growth strategy involves leveraging promotions to stimulate demand, especially in a challenging consumer spending environment.
“Having a stronger investment position should give them (MCD) a better voice in making sure that the growth that they expect out of that marketplace occurs,” said Northcoast Research analyst Jim Sanderson.
In August, Reuters disclosed that Trustar Capital, previously known as CITIC Capital, was considering the creation of a continuation fund. This fund would provide the Chinese private equity firm with the opportunity to reduce its stake in McDonald’s China.
In the early trading hours, Carlyle shares experienced a approximately 1% increase.