McDonald’s increases its China stake with Carlyle deal

McDonald’s said on Monday it would acquire investment firm Carlyle’s 28% stake in a partnership that manages its business in mainland China, Hong Kong and Macau, as the burger chain looks to simplify its structure in the region.

The deal will help McDonald’s raise its holdings to 48%, while a consortium led by state-backed conglomerate Citic will maintain its controlling ownership with a 52% stake in the business.

Reuters reported in April that Carlyle was discussing various options with financial advisers for its stake in McDonald’s China, including setting up a continuation fund for the asset.

There was “no better time to simplify our structure” given the benefits of China’s long-term potential, McDonald’s CEO Chris Kempczinski said.

The move comes nearly six years after the burger chain agreed to sell 80% of its China and Hong Kong businesses to Citic, its investment arm Citic Capital and Carlyle for up to $2.1bn.

McDonald’s, which has 5,500 stores in China, has been increasing the market share in its fastest-growing region by banking on promotions to drive demand higher in a weak consumer spending environment.

“Having a stronger investment position should give them a better voice in making sure that the growth that they expect out of that marketplace occurs,” said Northcoast Research analyst Jim Sanderson.

Reuters reported in August that Trustar Capital, formerly known as Citci Capital, was also planning to raise a continuation fund that would allow the Chinese private equity firm to sell down its stake in McDonald’s China.

Carlyle shares were up about 1% in early trading. 

Reuters