McDonald’s China and Hong Kong deal formally announced

McDonald’s has confirmed the sale of its China and Hong Kong operations to an investment consortium for US$2.08 billion (HK$16.14 billion).

Under the deal, the purchasers, Citic Limited, Citic Capital and The Carlyle Group, will open 1500 new outlets.

Phyllis Cheung, CEO of McDonald’s China, says the Beijing-based Citic companies will together hold a majority 52 per cent stake in the spun-off business and US-based Carlyle and McDonald’s will hold 28 per cent and 20 per cent, respectively. The consortium will run the business for 20 years.

McDonald’s says it will now re-franchise all its 2600+ stores in Mainland China and Hong Kong to improve sales performances, part of a global effort to cut costs.

Cheung told China Daily the new company will use its Citic’s strategic relationship with SF Express and Tencent Group Holdings (the owner of WeChat) to facilitate delivery, enhance restaurant convenience and boost its “retail digital leadership and menu innovation”.

“China and Hong Kong represent an enormous growth opportunity for McDonald’s,” said McDonald’s CEO Steve Easterbrook in a statement confirming the deal, which has been an open secret for some weeks.

“This new partnership will combine one of the world’s most powerful brands and our unparalleled quality standards with partners who have an unmatched understanding of the local markets and bring enhanced capabilities and new partnerships, all with a proven record of success,” he said.

The deal will be finalised in mid-2017.