McDonald’s Enters Into Strategic Partnership to Expand in Mainland China and Hong Kong

Cleary Gottlieb is representing McDonald’s Corporation in the formation of a company with CITIC Limited, CITIC Capital Holdings and The Carlyle Group that will act as the master franchisee responsible for McDonald’s businesses in mainland China and Hong Kong for a term of 20 years. 

Definitive transaction documents were signed on January 9, 2017. The deal is subject to regulatory approvals and is expected to close in mid-2017.

The total consideration payable by the new company to acquire McDonald’s mainland China and Hong Kong business is up to $2.08 billion (approximately HK$16.14 billion). The consideration will be settled by cash and by new shares in the company issued to McDonald’s. After completion of the transaction, CITIC Limited and CITIC Capital will have a controlling stake of 52 percent, while Carlyle and McDonald’s will have interests of 28 percent and 20 percent, respectively. 

The partnership will use its combined expertise and resources to accelerate growth in McDonald’s business through new restaurant openings and to improve sales performance in existing restaurants. It intends to add over 1,500 restaurants in China and Hong Kong over the next five years. 

McDonald’s is the world’s leading global foodservice retailer with over 36,000 locations in over 100 countries. CITIC Limited is China’s largest conglomerate operating domestically and overseas, with businesses in financial services, resources and energy, manufacturing, engineering contracting and real estate, as well as others. CITIC Capital was founded in 2002 and is an alternative investment management and advisory company. The firm manages over $8 billion of capital from a diverse group of international and Chinese investors. The Carlyle Group is a global alternative asset manager with $169 billion of assets under management as of September 30, 2016. Carlyle is one of the largest investors in China, having pursued approximately 90 investments over almost 20 years in China.