HONG KONG/SINGAPORE • McDonald's is set to agree to a deal to sell 20-year franchise rights for its Singapore and Malaysia outlets to Saudi Arabia's Reza group for up to US$400 million (S$548 million), as part of a rejig of its Asian business, people familiar with the matter said.

Reza Food Services, which owns and operates McDonald's restaurants in the western and southern regions of Saudi Arabia, has tapped Malaysian bank CIMB to finance the transaction, said two of the sources, who declined to be identified as the deal has not been publicly announced.

The move is in line with McDonald's plans to bring in partners as it switches to a less capital-intensive franchise model in Asia.

One person familiar with the South-east Asian deal said McDonald's was keen to tie up with regional family-owned groups and local tycoons as it sought out long-term partners rather than buyout firms, which usually cash out of a business after a few years.

The basic terms of the agreement had been finalised and the deal was expected to be completed by the year-end, the person said.

CIMB declined to comment, while there was no immediate response from McDonald's. Reuters was not immediately able to reach Reza for comment.

Sources said CIMB would provide the bulk of the term loan to back the deal, and the financing would be denominated in both Malaysian ringgit and Singapore dollars.

In July, McDonald's had said it was seeking franchise partners for its restaurants in Singapore and Malaysia, and was negotiating with parties, but did not provide any details or a timeline.

McDonald's has about 120 restaurants in Singapore and about 260 in Malaysia.

Earlier, the fast-food giant agreed to sell its China and Hong Kong outlets in a similar manner. It received final bids from at least three groups for these 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, sources said.

China and Hong Kong account for more than 85 per cent of the total 2,800 outlets up for grabs.

Separately, Yum Brands, the owner of Kentucky Fried Chicken and Pizza Hut, had also reportedly struck a deal to sell a slice of its China operations to a prominent Chinese deal-maker.

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.

REUTERS