MCD - McDonald's to increase stake in its China business

2023-11-20 10:48:15 ET

McDonald’s Corp (NYSE: MCD) has decided to own significantly more of its business in China. Its shares are marginally in the green at writing.

McDonald’s is repurchasing Carlyle stake

In 2017, Carlyle had bought a 28% stake in its China business that the food giant is now repurchasing to increase its minority share in the regional operations to 48%.

Financial details of the said deal are yet to be disclosed. Chris Kempczinski – the Chief Executive of McDonald’s said today in a press release :

We believe there’s no better time to simplify our structure, given tremendous opportunity to capture increased demand and further benefit from our fastest growing market’s long-term potential.

The announcement arrives only weeks after the multinational reported market-beating results for its third financial quarter. McDonald’s stock has gained about 12% in a little over a month.

McDonald’s has struggled with sales in China

Citic – an investment firm under ownership of the state will continue to have a majority stake (52%) in McDonald’s business in China.

The fast-food chain expects the transaction it disclosed this morning to close in the first three months of 2024 provided that it secures regulatory approvals.

Note that the New York-listed firm has roughly doubled the number of restaurants it owns in China to over 5,500 since 2017 – and is committed to further expanding its footprint in the largest Asian economy to 10,000 restaurants over the next five years.

McDonald’s, however, has struggled with sales in China since the pandemic. In 2022, it generated about 4.0% of its total revenue from the world’s second-most populous country – down 3.8% year-on-year.

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