McDonald's gets final bids for China and HK outlets

China's first McDonald's outlet, which opened in 1990 at the southern city of Shenzhen. McDonald's Corp has received final bids from at least three groups for its China and Hong Kong outlets, with global private equity firms Carlyle Group and TPG Cap
China's first McDonald's outlet, which opened in 1990 at the southern city of Shenzhen. McDonald's Corp has received final bids from at least three groups for its China and Hong Kong outlets, with global private equity firms Carlyle Group and TPG Capital separately teaming up with Chinese partners for the business worth up to US$3 billion (S$4.1 billion).PHOTO: REUTERS

HONG KONG • Fast-food giant McDonald's Corp has received final bids from at least three groups for its China and Hong Kong outlets, with global private equity firms Carlyle Group and TPG Capital separately teaming up with Chinese partners for the business worth up to US$3 billion (S$4.1 billion), sources said.

Carlyle has joined with Chinese state conglomerate Citic Group, while TPG has teamed up with mini-market operator Wumart Stores on their separate bids for the 20-year franchise, said the sources, who declined to be named.

Real estate firm Sanpower Group, which owns British department store House of Fraser, also made an offer for the assets, one of the sources said.

The company has previously said it was teaming up with Beijing Tourism Group.

Based on the final bids, McDonald's may end up working with the unlikeliest of franchise partners. Both Citic, a financial conglomerate which deals in products such as iron ore, and Sanpower, a real estate and technology group, have little experience in the restaurant business.

McDonald's announced in March that it was reorganising its Asian operations, bringing in partners as it switches to a less capital-intensive franchise model.

Carlyle and TPG have taken on only minority stakes in the bidding vehicles as McDonald's has said it prefers long-term partners, whereas buyout firms typically cash out after a few years.

Beijing Capital Agribusiness Group, which is McDonald's current China partner, and China Cinda Asset Management were previously in the running, though it was not clear if they had made final offers by the close of bidding on Wednesday.

The planned deal comes at a time when fast-food operators, including McDonald's and rival Yum Brands, are recovering from a series of food-supply scandals in China.

Earlier this month, Yum agreed to sell a US$460 million stake in its China unit. Some analysts have said that teaming up with local partners will help foreign fast-food operators navigate supply issues.

Foreign firms can also have problems dealing with government and finding suitable real estate, said Mr Alex Wong, a director at Ample Finance Group. "With the involvement of Chinese partners, it will make things easier," he said.

TPG and Carlyle declined to comment on their final bids, while Citic, Wumart and Sanpower did not return requests for comment during a holiday in mainland China.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 16, 2016, with the headline 'McDonald's gets final bids for China and HK outlets'. Print Edition | Subscribe