According to insiders, Carlyle Group Inc. and Trustar Capital are attempting to generate $4 billion by selling a portion of McDonald’s Corp.’s operations in Hong Kong and mainland China.
The persons claimed that GIC Pte Ltd. and Mubadala Investment Co., the national wealth fund of Abu Dhabi, have been approached about the deal, which values the entire company at up to $10 billion, including debt. The plan has received shareholder approval, and according to asset managers who asked to remain anonymous because they were discussing private topics, they hope to seal a deal with investors in the fourth quarter.
In order to give existing investors a partial exit while luring new cash to support restaurant expansion, private equity companies are establishing a new vehicle. Since exits have been more difficult over the past 18 months due to unstable public markets and rising interest rates, rolling over assets into a new fund has grown in popularity as a means for buyout firms to provide liquidity for their investors.
A spokesperson from GIC, Trustar, Mubadala, and Carlyle declined to comment.
According to a spokeswoman who responded to Bloomberg‘s questions, the fast food company plans to expand to 10,000 locations by utilizing shareholder funds and other resources as it takes advantage of China’s sustainable economic growth.
After setting a record in 2021, Bain & Co. said that the value of exits in the Asia-Pacific region fell 33% to $132 billion last year, 1% below the previous five-year average, citing falling stock prices and listings. When funds are getting close to the end of their tenure, continuation funds give managers the ability to hold onto performing assets, enabling later exits when market circumstances improve.
In 2017, McDonald’s sold roughly 80% of its operations in China and Hong Kong for about $1.7 billion, valuing the company at up to $2.08 billion. Since then, the number of McDonald’s China locations has more than doubled to 5,400, including 250 in Hong Kong. The American fast-food juggernaut intends to open 900 more locations in China this year.
Carlyle and Trustar, who own 28% and 42% of the new entity, respectively, will sell off a portion of their holdings and maybe reinvest some of the proceeds. They will continue to be in charge of running and growing the company.
The fourth Asia fund from Carlyle made an investment in the restaurant business in 2017, and Singapore’s GIC is one of its investors.
