Carlyle among final two bidders for McDonald’s China franchise in deal worth over US$2b

US private equity firm outbids other interested buyers for McDonald’s 2,200 restaurants in China

PUBLISHED : Tuesday, 23 August, 2016, 7:18pm
UPDATED : Tuesday, 23 August, 2016, 10:15pm

US private equity fund Carlyle Group may be one of the two final bidders left standing in a competitive auction process that will see the US$178 billion fund buy out US fast food chain McDonald’s China franchise of 2,200 restaurants for more than US$2 billion.

The deal comes as McDonald’s, which first expanded into China via an outlet opened in Shenzhen in 1990, announced in March it was looking to restructure its holdings in Asia. The fast food chain is seeking to reduce its physical ownership of restaurants in Asia, and would like to convert its strategy into an asset-light, franchise-focused model.

The current sale will give the successful buyer a 20-year master franchise agreement, which comes with options to extend for 10 years upon expiry.

Morgan Stanley was appointed as its advisor as the company is concurrently selling down its chain of 2,800 restaurants across China, Hong Kong and South Korea.

The bidding process may have now entered the final stage, as Carlyle, along with one other unnamed multinational company, have outbid other interested US and mainland buyers in the preceding auction rounds, the New York Post reported Tuesday, citing anonymous sources.

Previously, media reports said there were up to a dozen interested bidders.

China Cinda Asset Management, mainland food group Sanyuan, technology company Sanpower Group and local hotel operator GreenTree Management were among the companies invited to submit offers in the second round of the bidding process.

Reuters reported that private equity funds Bain Capital and TPG Capital also participated in the process.

Tammy Li, Carlyle’s Hong Kong-based spokeswoman, declined to comment when contacted by the South China Morning Post seeking verification on Tuesday.

PwC, which is acting on the instructions of the bidders, and Morgan Stanley, which acts as a sell-side advisor, also declined to comment.

McDonald’s current sale of its China franchise has come as Yum Brands, the company behind KFC and Pizza Hut, is also seeking to spin off its China business with an initial public offering. Yum’s chief executive Greg Creed said the move will give the brand greater stability in its earnings.