CITIC to sell 22% stake in McDonald's China business to PE arm: sources

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By Julie Zhu and Twinnie Siu

HONG KONG/BEIJING/SHANGHAI (Reuters) – CITIC Ltd (HK:), the main listed arm of Chinese state-owned conglomerate CITIC Group, plans to sell a 22% stake in McDonald’s Corp’s (N:) mainland China and Hong Kong business, which is likely to be bought by the group’s private equity arm.

The Hong Kong-listed company aims to raise at least 2.17 billion yuan ($312 million) through the sale, according to a company filing to the China Beijing Equity Exchange on Wednesday.

CITIC Capital, the group’s flagship alternative investment arm which manages over $26 billion in assets, would likely become the buyer, said two people with direct knowledge of the matter.

The sale is set to be finalised by early February, said one of the people who declined to be named as the information was private.

CITIC Ltd said the transaction is purely a “commercial decision” and it will continue to work for the development of McDonald’s business in China along with its partners. CITIC Capital said it is “actively participating” in the bidding process.

McDonald’s said the transaction would not affect its business strategy and daily operations in mainland China and Hong Kong.

The deal comes months after CITIC Capital raised $2.8 billion in its fourth China buyout fund, the firm’s biggest private equity fund to date, bolstering its ability to cut deals in the world’s second-largest economy.

CITIC Ltd is selling the 22% stake via Fast Food Holdings Ltd, a holding firm that it set up with CITIC Capital for the combined controlling stake of 52% in McDonald’s China and Hong Kong business.

McDonald’s Corp in early 2017 agreed to sell 80% of such business to CITIC Ltd (HK:), CITIC Capital and Carlyle Group LP (O:) for $2.08 billion, saying at the time that they hoped tying up with local partners could speed up growth in China.

CITIC Ltd held 32% of the business, with CITIC Capital and Carlyle holding 20% and 28%, respectively. McDonald’s retained the remaining 20%, the companies said in a statement at the time.

After the stake sale, CITIC Ltd will retain 10% of the business.

In late 2017, the U.S. fast food giant changed its registered business name to “Golden Arches (China) Co Ltd” in China and planned to nearly double the number of its outlets in mainland China to 4,500 by 2022.

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