Thursday, January, 23, 2020 06:44:16

CITIC plans to sell 22% of its stake in McDonald’s China business

CITIC Group, China’s state-owned conglomerate, has decided to sell and reduce its 42.3% stake in Fast Food Holdings Ltd. The unit controls the operation of McDonald’s Corp in China. In 2018, the revenue generated by Fast Food Holdings was 24.8 billion yuan and 24.4 billion yuan in 2019 (first 11 months). The operating profit and net profit for the first 11 months was 16.2 Bn yuan and 856.2 Mn yuan respectively, as stated by CITIC.

Food chains have been hit by rising prices due to the ongoing epidemic of Swine Fever in Africa. It wiped out a quarter of pigs in the world leading to a surge in animal protein prices in China. After two years of entering the fast-food chain, the group is taking upper hand as increasing prices pinch franchise’s gain.

As per a filing to the China Beijing Equity Exchange, Starry Dream Investments and CCP own 61.54% and 38.46% of Fast Food Holdings Limited. Through the sale, Starry Dream Investments is planning to acquire $312 million. Moreover, McDonald’s Corp based in Chicago holds 20% stake of the China business.

In 2017, McDonald’s Corp decided to sell huge bulk of its businesses based in China and Hong Kong to CITIC Ltd and Carlyle Group LP for approximately $2.08 billion. This decision was driven by the hope of accelerating growth in the world’s number 2 economy by securing local partners.

According to McDonald’s in China, CITIC is planning to sell 22% stake, which will reduce its share in chain’s operation to 10%.

A spokesperson based in Hong Kong said that the ongoing process is to augment future growth prospects of the group. McDonald’s China reported the rise in same-store sales for 3 years consecutively after CRITIC and its partners acquired the franchise in 2017. In Hong Kong and China, they have added more than 1,000 restaurants and will further continue to acquire benefits from the development of McDonald’s China.

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https://af.reuters.com/article/commoditiesNews/idAFL4N29D1KX