Hong Kong — McDonald’s plans to sign an agreement as soon as Monday to sell 80% of its operations in China and Hong Kong to a consortium of Citic Group Corporation and Carlyle Group, people with knowledge of the matter said.

The deal, which included 20-year mass franchise rights, valued the business at about $2bn including debt, the people said, asking not to be identified because the information was private. Citic, the Chinese state-backed conglomerate, plans to take a 52% stake while Carlyle would hold 28%, according to the people.

McDonald’s would retain a 20% shareholding in the venture, the people said. The sale could be announced this week, they added.

McDonald’s is revamping its ownership structure in markets such as China, South Korea and Southeast Asia as the world’s biggest restaurant chain attempts to streamline its sprawling global operations. CEO 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.

Terms of the deal could still change, according to the people. A Shanghai-based spokeswoman for McDonald’s did not immediately answer a phone call and e-mail seeking comment, while representatives for Carlyle and Citic declined to comment.

The months-long auction process drew interest from international private equity funds and local companies. In October, people with knowledge of the matter said TPG Capital had exited the race, leaving its erstwhile partner, Chinese grocery operator Wumart Stores, to compete against Carlyle and Citic. Bain Capital had also teamed up with Chinese hotelier GreenTree Hospitality for a bid, the people said at the time.

McDonald’s said in March it was seeking strategic partners to help it add more than 1,500 restaurants in China, Hong Kong and Korea over the next five years. It has more than 2,800 restaurants in those locations, most of which are company-owned. Its long-term target is to have 95% of its international outlets owned by franchisees.

US restaurant chains have seen their market lead in China challenged by a growing line-up of Asian competitors such as Ting Hsin International Group’s Dicos eateries. The seller of Big Macs is also playing catch-up to Yum China Holdings, its main fast-food competitor in Asia’s largest economy. The Chinese KFC operator spun off from its US parent Yum! Brands on November 1, and had a carte blanche opportunity to pursue growth and add 600 restaurants a year in the country, CEO Micky Pant has said.


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