Carlyle Group Inc. is considering bringing in fresh backers for its investment in McDonald’s Corp.’s Chinese operations, people familiar with the matter said.
(Bloomberg) — Carlyle Group Inc. is considering bringing in fresh backers for its investment in McDonald’s Corp.’s Chinese operations, people familiar with the matter said.
The buyout firm, which controls McDonald’s China together with Trustar Capital, has been discussing transferring their shareholding into a new investment vehicle, the people said. The potential deal would allow new investors to gain exposure to the business, while allowing existing limited partners the option to exit or roll over their stakes, they said.
Carlyle is considering seeking a valuation of around $8 billion to $10 billion for McDonald’s China through the potential move, one of the people said. The US private equity firm and Trustar could sell down part of their stakes in the fast-food giant in the deal while still retaining control, the person said.
Facing tighter financing and market volatility, investment firms have increasingly relied on arrangements like continuation funds as alternatives to initial public offerings of their portfolio companies or putting them up for sale. The introduction of new limited partners would allow Carlyle and Trustar to continue managing their stakes while providing liquidity to existing investors in their earlier funds.
Considerations are at an early stage and no final decisions have been made, the people said.
There is no change to McDonald’s China’s shareholding structure, a spokesperson for the company said in response to a Bloomberg News query. Trustar and Carlyle’s commitment to the long-term sustainable growth of McDonald’s China will continue, they added.
Representatives for Carlyle and Trustar, the private equity affiliate of Citic Capital Holdings Ltd., declined to comment.
In 2017, McDonald’s sold about 80% of its China and Hong Kong operations for around $1.7 billion, valuing the business at as much as $2.08 billion. The deal gave Chinese state-backed conglomerate Citic Ltd. and Citic Capital Partners, now known as Trustar, a 52% stake while Carlyle held 28%. Chicago-based McDonald’s kept the remaining stake as part of the agreement.
The number of McDonald’s China outlets has more than doubled since the deal. The company operated about 5,200 stores in China and 250 in Hong Kong, and will open 800 to 1,000 new outlets in 2023, one of the people said.
McDonald’s China raised about $2 billion in bank loans to free up liquidity during the battle against Covid-19, Bloomberg News reported in November. Its delivery services kept growing even amid on-and-off lockdowns in mainland China, people familiar with the matter have said.
–With assistance from Daniela Wei.
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