Bidding starts for McDonald’s China business
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Beijing Tourism Group, ChemChina and Sanpower are among bidders for McDonald’s China restaurants and the 20-year master franchise covering China and Hong Kong.
The deal is said to be worth about US$3 billion, and bids close on Monday.
Restrictions on the franchise agreement have discouraged such buyers as private equity firms, but others have entered the auction, reports CNBC.
McDonald’s China partner Beijing Capital Agribusiness Group has been reported to be among companies preparing first-round bids ahead of the deadline, but an official has said the company is not participating in the bidding.
Illinois-based McDonald’s has hired Morgan Stanley to run the sale of about 2800 restaurants in China, Hong Kong and South Korea. The South Korea sale is being run separately.
McDonald’s announced in March that it was reorganising in Asia by bringing in partners to own restaurants within the franchise business. Competitor Yum Brands, which has the KFC and Pizza Hut chains, is also restructuring in China.
Domestic rivals are becoming more competitive, and the two international fast-food giants have had food-safety scares.
“Given the difficulties Western chains have had recently with public perception, local players have become a serious competitive threat,” says Euromonitor International foodservice analyst Elizabeth Friend.
Meanwhile, McDonald’s will draw up a shortlist of bidders for the next round in the coming weeks.
McDonald’s China and Hong Kong business posted about $200 million in earnings in its latest financial year.
Questions & Answers
Q.Which specific regions are included in the 20-year master franchise up for bidding?
Which specific regions are included in the 20-year master franchise up for bidding?
The 20-year master franchise agreement covers McDonald’s restaurants in both China and Hong Kong. It applies to approximately 2800 restaurants within these two regions, excluding the South Korea operations which are being handled separately.
Q.What is the primary reason some potential buyers, like private equity firms, have been deterred from bidding?
What is the primary reason some potential buyers, like private equity firms, have been deterred from bidding?
Restrictions outlined in the franchise agreement have discouraged certain buyers, such as private equity firms, from participating in the auction. Despite these restrictions, other types of bidders have still entered the process for the business.
Q.Who is managing the sale process for McDonald's China and Hong Kong business?
Who is managing the sale process for McDonald's China and Hong Kong business?
Illinois-based McDonald’s has appointed Morgan Stanley to manage the sale of its China and Hong Kong business. This investment bank is responsible for running the auction and handling the bidding process for the 2800 restaurants involved.
Q.What factor has increased the competitive threat from local players to Western fast-food chains?
What factor has increased the competitive threat from local players to Western fast-food chains?
Recent difficulties Western chains have faced with public perception, including food-safety scares, have strengthened local competitors. This situation has allowed domestic players to become a significant competitive threat in the fast-food market.
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