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McDonald’s China backer Carlyle weighs exit – sources

Carlyle is weighing a potential exit from Jin Gong Men China (McDonald’s China), the mainland China and Hong Kong operations of fast-food chain McDonald's [NYSE:MCD], said four sources familiar with the situation.

The global investment firm has held talks with a couple of advisors regarding a potential sale of its entire 28% stake in the business, the sources said.

The private equity fund Carlyle Asia Partners IV, launched in May 2012, is nearing fund expiration, the first two sources explained.

The stake sale is still at a preliminary stage, and other options being explored include rolling the portfolio to a new continuation fund, the second and the third sources said.

McDonald’s China’s other shareholders Trustar Capital, formerly known as CITIC Capital, and McDonald’s do not have the intention to sell, all the sources said. 

McDonald’s China posted total revenue of CNY 19bn (USD 2.7bn) in the first nine months of 2022, up 2.7% YoY, backed by new store openings, the first source said. 

The company generated around CNY 2bn EBITDA in the first nine months of 2022, down 11% YoY, the source noted, adding that the change was mainly due to the temporary store closures amid COVID lockdowns in Shanghai in 2Q22.

In 2020, CITIC [HKG:0267] sold its 22% stake in McDonald’s China to parent company CITIC Group’s PE arm Trustar for a total consideration of USD 533m, raising Trustar’s stake to 52%, as announced

Back in 2017, Carlyle had formed a consortium with CITIC Capital and CITIC to purchase an 80% stake in the business for USD 2.1bn, while McDonald’s retained the remaining 20% stake, as disclosed

McDonald’s China operated 4,978 stores in mainland China, 250 stores in Hong Kong and 39 stores in Macau as of 31 December 2022, according to McDonald’s website.

Hong Kong-based private equity firm Affinity Equity Partners would likely resume a sale process of Burger King's Japan and Korea businesses, namely Burger King Japan and BKR, some time after the second half of next year, Seoul Economic Daily reported on 10 November 2022. The deal value was estimated to be more than 10x EBITDA multiples, according to Mergermarket’s scoop last November.

Carlyle declined to comment. McDonald’s China did not respond to a request for comment.