Citic to Sell 22% Stake in McDonald’s China for $300 Million
Citic to Sell 22% Stake in McDonald’s China for $300 Million
(Bloomberg) -- Chinese state-owned conglomerate Citic Ltd. is planning to significantly reduce its stake in McDonald’s China Co. more than two years after it bought into the fast-food chain, as rising costs pinch the franchise’s profit.
McDonald’s China said in a statement Wednesday that Citic is looking for buyers for a 22% stake, which will bring its share in the chain’s China operations down to 10%. The bottom price for the stake is set at 2.17 billion yuan ($312 million) and the bidding process is ongoing, said a disclosure document filed by Citic to the Beijing Equity Exchange.
Separately, Citic Capital Holdings Ltd.-- partly owned by Citic Ltd. -- said it’s interested in buying the stake. It currently owns 20% in McDonald’s China.
“Citic Capital is confident with the future growth and prospects of the business and we’re actively participating in the bidding process,” said a Hong Kong-based spokeswoman.
Citic Ltd. said in an emailed statement that the transaction was “purely a business decision.” Citic and its partners have added more than 1,000 new restaurants in mainland China and Hong Kong since they took over and will continue to benefit from the development of McDonald’s China, it said.
Citic Ltd. said Chicago-based McDonald’s Corp. holds a 20% stake in the China business.
The stake sale comes as the fast-food chain saw revenue and profit growth stall amid fierce competition in China’s dining scene. Food chains have also been hit by rising costs due to the ongoing African Swine Fever epidemic, which has wiped out a quarter of the world’s pigs and caused animal protein prices in China to surge.
Citic’s disclosure document showed that revenue for the McDonald’s China master franchiser, called Fast Food Holdings Ltd., was HK$24.8 billion ($3.2 billion) in 2018. For the first 11 months of 2019, it was HK$24.4 billion.
Operating profit for the first 11 months of 2019 was HK$16.2 billion and net profit for the same period was HK$856.2 million, according to the statement. This is compared to HK$16.4 billion and HK$1.15 billion, respectively, for all of 2018.
McDonald’s China said that same-store sales have risen for three years consecutively since Citic and its partners bought over the franchise in 2017.
To contact the reporters on this story: Jinshan Hong in Hong Kong at jhong214@bloomberg.net;Cathy Chan in Hong Kong at kchan14@bloomberg.net
To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Jeff Sutherland
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