BEIJING • McDonald's has entered a deal to sell 80 per cent of its operations in China and Hong Kong to a consortium including Citic and Carlyle Group.
The agreement, which includes 20-year mass franchise rights, values the business at about US$2.08 billion (S$3 billion), Citic said in a statement to the Hong Kong exchange yesterday.
The deal comes a month after the world's biggest restaurant chain sold the franchise rights for its outlets in Singapore and Malaysia to Saudi Arabia's Lionhorn as part of a plan to move away from direct ownership in Asia.
The Chinese state-backed conglomerate and Citic Capital Partners will jointly take a 52 per cent stake, while Carlyle will hold 28 per cent and McDonald's will retain a 20 per cent shareholding, according to the statement.
McDonald's is revamping its ownership structure in markets such as China, South Korea and South-east Asia as it tries to streamline its sprawling global operations.
Chief executive officer Steve Easterbrook is pursuing a turnaround plan to revive the company as it faces the fourth straight year of traffic falls in the United States, its largest market.
The months-long auction process drew interest from global private equity funds and local companies.
In October, people with knowledge of the matter said TPG Capital had exited the race, leaving its erstwhile partner, Chinese grocery operator Wumart Stores, to compete against Carlyle and Citic.
Also, Bain Capital had teamed up with Chinese hotelier GreenTree Hospitality for a bid, the people said at the time.
McDonald's said last March that it was seeking strategic partners to help it add more than 1,500 restaurants in China, Hong Kong and Korea over the next five years.
It has more than 2,800 restaurants in those locations, the majority of which are company-owned. Its long-term target is to have 95 per cent of its international outlets owned by franchisees.
US restaurant chains have seen their market lead in China challenged by a growing line-up of Asian competitors like Ting Hsin International Group's Dicos eateries.
The seller of Big Macs is also playing catch-up to Yum China Holdings, its main fast-food competitor in Asia's largest economy.
The Chinese KFC operator spun off from its US parent Yum! Brands, and has a carte blanche opportunity to pursue growth and add 600 restaurants a year in the country, CEO Micky Pant has said.
McDonald's transferred ownership interest in 390 restaurants in Singapore and Malaysia to Lionhorn, led by Sheikh Fahd and Abdulrahman Alireza, who are franchisees for nearly 100 of the chain's restaurants in Saudi Arabia.
McDonald's did not disclose the terms of the deal, but it was reportedly worth up to US$400 million.
The Lionhorn deal is in line with McDonald's plans to bring in partners in Asia as it switches to a less capital-intensive franchise model. It said it has franchised about 1,300 outlets as part of its target to become 95 per cent franchised by the end of 2018.