Super PE Carlyle Group recently announced that McDonald's Global has agreed to acquire a minority stake in Carlyle's strategic partnerships in mainland China, Hong Kong, and Macau. After the transaction is completed, CITIC consortium will continue to hold 52% of the shares, and McDonald's Global, as a minority shareholder, will increase its shareholding ratio from 20% to 48%.
This means that after holding for 6 years, Carlyle sold all its shares in McDonald's China and achieved an exit. It is not difficult to see that even top PE institutions seeking exit have become the top priority at present.
Holding for 6 years, Carlyle sold McDonald's
Since October 1990, the first McDonald's restaurant in China opened on Guanghua Road in Shenzhen, officially marking the beginning of McDonald's expansion into China. In this official announcement, Chris Kempczinski, Global President and CEO of McDonald's, provided a set of data - China is now McDonald's world's second largest market. Since September 2019, McDonald's China has achieved a system sales growth of over 30%, with over 5500 restaurants, doubling from 2017.
Our strategic cooperation with CITIC and Carlyle has been very successful, and the McDonald's brand is rapidly developing in China. We believe that now is the best time to simplify the equity structure, and the growing consumer demand in China has brought us huge opportunities. China is McDonald's fastest-growing market globally, and its long-term development potential will continue to benefit us, "said Chris Kempczinski.
According to data from iMedia Consulting, the market size of Western style fast food in China was 368.78 billion yuan in 2023, an increase of 36.3% year-on-year. The market size is expected to reach 427.78 billion yuan in 2024. Analysts from iMedia Consulting believe that as consumers' demand for food becomes more diverse, fast food companies are integrating "all categories", and the combination of Chinese and Western fast food is more popular among consumers. The trend of integrating fast food categories is highlighted, and catering enterprises are moving towards the direction of "fast food dining".
Although boosting consumption has been the theme of market calls since the beginning of this year, there have also been continuous voices of consumer downgrades. But this has not affected the expansion of branded catering consumer enterprises. Zhang Yichen, Chairman and CEO of CITIC Capital and Chairman of the Board of Directors of McDonald's China, stated that McDonald's China is moving towards the goal of breaking through 10000 restaurants by 2028, As the controlling shareholder of McDonald's China, we are pleased to see the recognition of our long-term partnership and further investment in the Chinese market from McDonald's headquarters. We are full of confidence and will continue to do our best to serve Chinese consumers with McDonald's classic delicacies
Since 2000, Carlyle has been active in the Chinese market and is one of the earliest global private equity investment companies to enter. It is committed to working closely with Chinese companies to help invested companies expand their business and achieve long-term sustainable growth. As a part of the global private equity department, Carlyle invests in outstanding Chinese companies through Asia Merger and Acquisition Fund, Asia Growth Fund, and RMB Fund. Consumer and retail are also its earliest areas of presence in China, with its participation in companies such as Special Step, Perfect Diary, Monster Charging, and more.
In 2017, Carlyle, together with CITIC Corporation and CITIC Capital, acquired McDonald's operations in mainland China and Hong Kong for a total consideration of HKD 16.141 billion (US $2.08 billion), and obtained 20 years of franchise rights in both regions. As a result, "Golden Arch" was born, becoming McDonald's largest franchise outside the United States. According to the announcement of CITIC Corporation at the time, after the transaction was completed, CITIC, Carlyle, and McDonald's respectively held 52%, 28%, and 20% of McDonald's China's equity. After the completion of this delivery, CITIC consortium will continue to hold 52% of the shares, and McDonald's global shareholding will increase to 48%.
Yang Xiangdong, Chairman of Carlyle Asia Pacific, said, "Thank you to CITIC Capital and McDonald's Global for their close cooperation with us. We have jointly promoted the rapid development of McDonald's China business and the innovation of digital marketing and operation capabilities. McDonald's China's business continues to perform excellently, and we wish McDonald's China more success in the future development stage
Sell multiple assets
As an investor, Carlyle Investment Group is one of the largest and most diversified global investment companies in the world. Established in 1987 in Washington, D.C., with nearly 2200 professionals in 28 offices across five continents, it currently manages 600 investment vehicles and has assets worth $382 billion. So far, we have invested over $10 billion in equity in China, with core investment industries including consumer and retail, healthcare, financial services, technology, telecommunications and media, and industry.
Not only McDonald's, but against the backdrop of changes in the global economic environment and a reversal of capital inflows into the private equity market, Carlyle is also selling other assets. On July 7, 2022, Carlyle planned to sell its stake in AmbioPharma with a target valuation of $1 billion. This is a peptide active pharmaceutical ingredient CDMO (contract research and development production organization) company that has been expanding its business in the United States and China. In addition, according to a report by CaiAssociated Press on November 1st, Carlyle is seeking to sell German software company SER; On November 6th, Reuters reported that insiders revealed that Carlyle is also considering selling Tokiwa Corp, a Japanese cosmetics supplier, with a possible transaction value of up to $1 billion.
Carlyle also faces significant pressure from its own performance. On November 7th, Carlyle released its financial report for the third quarter of 2023. The company recorded revenue of $777 million in the third quarter, lower than the average analyst expectation of $800 million. The net profit was $81.3 million, a 71% drop compared to the same period last year. The decline in revenue was mainly due to the difficulty in exiting investment projects. In the third quarter, the company's performance income (mainly reflecting asset sales in the private equity department) has sharply decreased by 76% after exiting investments. As of the close of November 20th Eastern Time, Carlyle's stock price rose slightly by 1.21% to close at $31.8.
The exit problem that troubles institutions is particularly evident in 2023, and finding suitable buyers to unwind may be a good choice for Carlyle.
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