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US FAST-FOOD giant McDonald’s will sell a controlling stake in its Chinese and Hong Kong business for up to $2.08 billion (about €1.9 billion) to a consortium including state-owned Citic and the Carlyle Group, it was announced Monday.
The deal is part of an international turnaround plan by the Golden Arches as it struggles with sluggish growth at home.
Citic Limited, Citic Capital Holdings, Carlyle Group and McDonald’s will form a company that will act as a franchisee for the chain’s business in mainland China and Hong Kong for 20 years, the companies said in a joint statement.
Citic is a vast Chinese state-owned conglomerate with interests in businesses ranging from energy and manufacturing to real estate.
It said in a statement to the Hong Kong Stock Exchange that the purchase would deepen its exposure to China’s consumer sector, “which is poised to be the main driver of China’s economy for decades to come”.
The burger chain last year announced plans to sell its 2,600-plus restaurants in China and Hong Kong, after sales took a hit as tensions in the South China Sea dented US companies’ earnings in the country.
Its Chinese business also suffered a blow in 2014 after a food safety scandal involving one of its meat suppliers.
The deal gives McDonald’s partners “who have an unmatched understanding of the local markets and bring enhanced capabilities”, CEO Steve Easterbrook said in the statement.
Citic and Citic Capital will have a stake of 52%, Carlyle will take 28% and McDonald’s will retain 20% of the new company.
It will focus on growth in China’s smaller regional cities and plans to open more than 1,500 restaurants on the mainland and in Hong Kong over the next five years.
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“Citic and Carlyle’s resources will allow McDonald’s to expand rapidly and refurbish old restaurants, which is expensive to do,” Ben Cavender of China Market Research Group told Bloomberg News.
“Given that McDonald’s lags behind KFC in terms of store count in China, we can expect them to expand aggressively and invest heavily.”
Global overhaul
The Illinois-based burger chain has been overhauling its global structure under Easterbrook to compensate for slower growth in markets such as France and the US, its largest market.
The global restructuring plan calls for refranchising 4,000 restaurants by the end of 2018, with the long-term goal of franchising 95% of its outlets.
The new company will focus on menu innovation and enhanced restaurant convenience, and McDonald’s existing management team will continue to lead the business, the statement said.
McDonald’s opened its first restaurant in mainland China in 1990 and currently employs over 120,000 people, it said, adding that the fast-food chain is the country’s second-largest.
It was one of the largest-ever China-based deals for asset manager Carlyle, which has invested more than $7 billion (about €6.6 billion) of equity in the world’s second-largest economy, according to the statement.
The deal is expected to be closed in mid-2017 pending regulatory approval.
Investors appeared to welcome the deal, as shares of Citic Limited closed up 1.24% on the Hong Kong exchange today.
Rival Yum Brands, owner of KFC, Pizza Hut and Taco Bell, last year split off its $6.9 billion (about €6.5 billion) Chinese business into a separate company, Yum China, to focus on its huge but struggling restaurant empire in the country.
And now, lets get onto the important stuff… the lotto. The last lotto I monitored for integrity was very interesting, because the people who ran the lotto, actually won it! So it’s not unusual for that to happen, now and again
@Dan The Man: listen Dan most readers do not know but you are well known for pulling your own name from the drum of the local gaa draw the two times you were asked to officiate
@Dan The Man: and the guy that won it didn’t know he’d won it cause he was holding the ticket upside down!! Number 11 I think, was the winning number!!
It might make for an awkward TV viewing experience, but maintaining public faith in the integrity of all the draws, would be better served by continuing the live broadcast with any technical difficulties included.
@Mary Toilet: He did the lotto in the bookies, won a few 5 number accumulators, clever guy, hid the cash under the strawberry patch, got paid in cash, bought shares in ‘Meanies’ crips and sold at the right time. Who needs a bank account.
@Davy: This seems to upset you a lot.
Do you have a need to tell others you opinion?
Is validation or the approval of strangers something important to you?
@Alison Hughes: I would imagine it’s more of the fact that it was an exceptional site for debate up until quite recently and people enjoyed the debates in general. 90% were done with a degree of respect to opposing views and it was a an opportunity to get a sense of public support on topics.
I am a rare poster but I enjoyed the discussions and back and forth. And despite a small minority of completely entrenched views it was nice to see at times people coming around to understanding at least parts of other viewpoints! If your argument is the correct one it could clearly be won without silencing opposition which only drives fringe elements beliefs. Put it out there.
I for one miss that aspect of the site which seems now to only want one consensus view that aligns with there articles.
@R B: From a casual observer’s perspective, the comment section can be broken down into 3 groups;
1) the people that have a need for their opinions to be heard…a sort of validation, if you will.
2) those that feel the “establishment” are conspiring against them and post in the comments section as nobody anywhere else would listen to them.
3) those that feel they know better than those appointed to positions of responsibility, e.g. those that feel able to say our Taoiseach is this, that or the other when they themselves come nowhere near having achieved any level of success.(This group is the most humorous as they remind me of a security guard on the gate of Microsoft who thinks they run the company!)
All jokes aside I think you have about 25% there and I agree with elements of what you say but at least some of them have to right about something’s so we can’t just decide we are right and they shouldn’t be heard is the key point imo. Let ppl have there say it doesn’t affect us. Debate if you want ignore if you want but let them speak.
I did chuckle at the security guard comparison. Life would be boring if we all taught in same way. And it’s differing opinions and debate that leads to innovation.
Today is day be out in sun. Hope you have great day
@R B: I agree with you 100% and you hit the nail on the head saying life would be boring if we all thought the same…It’s the sense of “injustice” that many feel when they can’t comment on an online article that makes me laugh!
They are like toddlers screaming to be heard!
The sun is indeed out and you’re right about being out in it!
Have a great day too!
My only issue with the integrity of the Lotto, is that all the profits are funding foreign investors. The Lotto boasts that it contributes four million Euro every week towards Irish causes. I’d love to see evidence of that! It also shows the problem we have with gambling in this country. – How much is given towards rehabilitation of gambling addicts I wonder? Integrity, my ass!
RTE and trust. Never to be the same again. That bastion of truth the bbc has been steadily losing its credibility too. Where will ordinary Joe and Joan go to for their world view ?
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