CITIC's Stake Sale in McDonald's China: A Strategic Shift
Monday, Oct 21, 2024 5:35 am ET
1min read CITIC, a state-owned investment firm, has agreed to sell its 28% stake in McDonald's China business for $430.3 million, marking a significant strategic shift in the fast-food giant's operations in the world's second-largest economy. This move comes as McDonald's seeks to simplify its structure and capitalize on the growing demand in China, its second-largest market by number of locations.
The sale, expected to close in the first quarter of 2024, will increase McDonald's minority share in the China business from 20% to 48%. Citic, the controlling shareholder, will retain its 52% stake. This transaction values the China unit at around $6 billion, significantly higher than its 2017 valuation of up to $2.1 billion when McDonald's sold 80% of the business to CITIC and Carlyle.
McDonald's CEO Chris Kempczinski expressed confidence in the burger chain's growth prospects in China, stating that there is "no better time to simplify our structure, given the tremendous opportunity to capture increased demand and further benefit from our fastest growing market's long-term potential." Since 2017, McDonald's has doubled its footprint in China to over 5,500 locations and aims to reach 10,000 restaurants by 2028.
This deal contrasts with the prevailing trend of multinational corporations reeling back investments in China or exiting the market altogether due to geopolitical and economic challenges. By increasing its stake, McDonald's demonstrates its commitment to the Chinese market and its potential for growth. As the business has generated sales growth of over 30% since September 2019, McDonald's is well-positioned to continue expanding its presence in China.
The sale, expected to close in the first quarter of 2024, will increase McDonald's minority share in the China business from 20% to 48%. Citic, the controlling shareholder, will retain its 52% stake. This transaction values the China unit at around $6 billion, significantly higher than its 2017 valuation of up to $2.1 billion when McDonald's sold 80% of the business to CITIC and Carlyle.
McDonald's CEO Chris Kempczinski expressed confidence in the burger chain's growth prospects in China, stating that there is "no better time to simplify our structure, given the tremendous opportunity to capture increased demand and further benefit from our fastest growing market's long-term potential." Since 2017, McDonald's has doubled its footprint in China to over 5,500 locations and aims to reach 10,000 restaurants by 2028.
This deal contrasts with the prevailing trend of multinational corporations reeling back investments in China or exiting the market altogether due to geopolitical and economic challenges. By increasing its stake, McDonald's demonstrates its commitment to the Chinese market and its potential for growth. As the business has generated sales growth of over 30% since September 2019, McDonald's is well-positioned to continue expanding its presence in China.
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