HONG KONG • Private equity firms Carlyle Group and TPG Capital have teamed up with two separate Chinese state companies to bid for McDonald's outlets in China and Hong Kong in a deal worth between US$2 billion (S$2.72 billion) and US$3 billion, Reuters has reported, quoting people familiar with the matter.
The sources said the global buyout firms are pairing up with strategic bidders that more closely fit the profile McDonald's has said it is looking for; long-term partners, rather than private equity firms, which typically cash out after a few years.
Meanwhile, Yum Brands, the owner of Kentucky Fried Chicken and Pizza Hut, has also reportedly struck a deal to sell a slice of its China operations to a prominent Chinese deal-maker, the Wall Street Journal said.
Primavera Capital, run by former chairman of Goldman Sachs Greater China division, Mr Fred Hu, will buy a combined stake of US$460 million in Yum China, along with Ant Financial Services - an affiliate of Alibaba Group, the WSJ report said.
Yum, which was successful in making KFC China's most popular fast food, has in recent years stumbled as growing competition and food-safety concerns hit sales.
McDonald's has also been hit by a series of food-supply scandals in China. It had hired Morgan Stanley to run the sale of about 2,800 restaurants in China, Hong Kong and South Korea.
Carlyle is working with Chinese state conglomerate Citic Group, and TPG has joined hands with Beijing Capital Agribusiness Group, to place binding bids ahead of the mid-September deadline, the sources added. Beijing Capital Agribusiness is McDonald's current China partner.
Carlyle and TPG would have a large minority stake in their respective consortium, one of the people said. The two private equity- backed groups are bidding only for China and Hong Kong outlets and will be pitted against China Cinda Asset Management, Beijing Tourism Group and private Chinese technology and real estate firm Sanpower Group, sources said.
China and Hong Kong account for more than 85 per cent of the total 2,800 outlets up for grabs.
Separately, South Korea's Maeil Dairy Industry said it was considering bidding for McDonald's local outlets, which are expected to fetch about US$268 million. The company declined to say whether it would seek a partner, but a South Korean media report said Maeil was likely to link up with Carlyle.
CJ Corp and NHN Entertainment Corp were among the other South Korean companies that have previously shown interest in the fast-food giant's business in the country.
McDonald's is switching to a less capital-intensive franchise model and is offering a 20-year franchise to buyers, with a 10-year extension option. The franchise model has also been adopted by arch rival Yum Brands.
Carlyle, TPG, Sanpower and Cinda declined to comment, and Citic and Beijing Capital Agribusiness Group did not reply to requests for comment. A McDonald's spokesman said no decisions had been made.
"We are making progress as we look for long-term strategic partners with local relevance... and who share our values and vision with a dedicated focus on accelerating growth initiatives," she said.