According to Bloomberg on February 20th, several sovereign funds in the Middle East and China are in talks to jointly invest in McDonald's China business.
According to insiders, companies including Mubadala Investment, Qatar Investment Authority, and CIC are considering jointly investing in McDonald's China as minority shareholders. Negotiations are currently underway and it may take one or two months to reach a potential agreement, with the key point being valuation.
McDonald's major shareholder, CITIC Group, has been holding 52% of McDonald's China shares through its subsidiary, Trustar Capital. According to the person familiar with the matter, CITIC Group has recently been considering various investment plans in order for Trustar Capital to seek to reduce its holdings, such as transferring the equity to a new investment company.
Regarding the news of this transaction, no response has been received from the parties involved. McDonald's China has declined to comment on Interface News.
The cooperation between CITIC Group and McDonald's originated in 2017. On August 8, 2017, McDonald's sold its 20-year franchise rights to approximately 2700 McDonald's restaurants in mainland China and Hong Kong to CITIC Group and Carlyle Investment Group for a total consideration of up to $2.08 billion. Subsequently, the three parties established a new joint venture company and named it "Golden Arch Gate". Among them, CITIC holds a total of 52% controlling stake in the new company, while Carlyle and McDonald's hold 28% and 20% equity respectively.
On July 13, 2023, Bloomberg quoted insiders as revealing that Carlyle and Xinchen Capital, a subsidiary of CITIC Capital Holdings, are seeking a $4 billion bid to transfer some of their equity in McDonald's mainland China and Hong Kong operations to some funds, providing partial exit opportunities for these two companies.
In Bloomberg's report at the time, Carlyle and Xinchen Capital had already approached Singapore Government Investment Corporation (GIC Pte) and Abu Dhabi Sovereign Wealth Fund Mubadala Investment Co. for this transaction, which valued the entire business at $10 billion.
Subsequently, on November 20, 2023, Carlyle officially withdrew from McDonald's China business and was taken over by McDonald's globally. McDonald's Global announced the acquisition of a minority stake held by Carlyle in McDonald's strategic partnerships in mainland China, Hong Kong, and Macau. After the completion of this transaction, CITIC will continue to be the controlling shareholder of Golden Arches, holding 52% of the shares. McDonald's Global, as a minority shareholder, will increase its shareholding from 20% to 48%.
The latest exposed transaction negotiations may also be part of the shareholders' partial exit plan.
Fund groups from the Middle East are increasing their investment in Asia.
In January 2024, Caixin reported that Mubadala Investment Company is preparing to double its investment in Asia in the coming years, or involve billions of dollars in new investment demand.
Camilla Macapili Languille, the head of the Life Sciences and Health department at Mubadala, has publicly stated that out of the fund's approximately $300 billion asset management scale, approximately 12% of investments are currently allocated to the Asian region. She hopes to increase this number to 25% by 2030 at the earliest.
According to the company's 2022 annual report, previous investments were mainly concentrated in the European and American regions, with North America accounting for 40%, the United Arab Emirates and Europe accounting for 23% and 15% respectively.
But according to Macapili Languille, Abu Dhabi's sovereign wealth funds are now shifting their focus to emerging markets with lower positions, such as China, India, and other major Asian economies, and the fund has always been interested in Asia.
McDonald's China may be a good investment choice for them.
At present, China has jumped to become McDonald's world's second largest market. As of December 31, 2023, McDonald's China has 5903 stores.
McDonald's is also increasing its investment in the Chinese market. CEO Chris Kempczinski stated in an interview in December last year that the company plans to increase the number of restaurants in China from 6000 to 10000 by 2028- a goal that McDonald's China has repeatedly mentioned since last year.
In the past year, McDonald's China has added 925 new stores throughout the year, not only achieving its annual target, but also setting a new historical high in store opening speed. The number of new stores in the Chinese market has also contributed 67% of McDonald's international franchise market share.
Under the changing consumer environment in China, McDonald's China is not only facing challenges in competition and expanding its stores, but also launching various strategies to cater to the current trend of high cost performance consumption. For example, it has always been selling packages in the past.
McDonald's China stated in December 2023 to Interface News that there will be new promotional activities launched every month, such as limited time discounts such as "half price for the second portion" and "buy one get one free for the first bucket of gold" for designated packages. On February 21st, it also launched a 15 yuan breakfast two-piece set and a 50% reduction in delivery fees. If this transaction can be completed, the entry of the new fund may also make McDonald's China more competitive in the overall environment.