CITIC to offload 22% stake in McDonald's China

CITIC Ltd, the listed arm of Chinese State-owned conglomerate CITIC Group, is planning to sell part of its stake in McDonald's China Co less than two years after it purchased the same.

McDonald's China, which is still expanding in the country, said on Wednesday that CITIC is looking to sell a 22 percent stake. McDonald's China said the related transactions will have no impact on its operations on the Chinese mainland and Hong Kong and it would not comment on any speculation at the moment.

The bottom price for the stake has been set at 2.17 billion yuan ($312 million) and the bidding process is ongoing, according to a disclosure document filed by CITIC to the Beijing Equity Exchange.

CITIC Capital Holdings Ltd, the group's flagship alternative investment arm, is believed to be keen on acquiring the stake, apart from the 20 percent it already owns in McDonald's China.

"CITIC Capital is confident about the future growth and prospects of the business and we are actively participating in the bidding process," said a Hong Kong-based spokeswoman.

The stake sale comes as the fast-food chain saw revenue and profit growth stall amid fierce competition in China's dining scene.

CITIC's disclosure document showed that revenue for the McDonald's China master franchiser, called Fast Food Holdings Ltd, was 24.8 billion yuan in 2018. For the first 11 months of 2019, it was 24.4 billion yuan. Operating profit for the first 11 months of 2019 was 16.2 billion yuan and net profit for the same period was 856.2 million yuan, according to the statement. This is compared with 16.4 billion yuan and 1.15 billion yuan respectively for 2018.

McDonald's China said its business in China remains sound and healthy, with same-store sales having risen for three years in a row since CITIC and its partners acquired the franchise in 2017. Its same store sales, sales per customer and profits grew steadily last year.

Jason Yu, general manager of Kantar Worldpanel China, said McDonald's China is still a very healthy and steady asset for the long term. Yu said further penetration into the lower-tier cities and new consumption scenarios including takeout foods and online-to-offline integration will bolster McDonald's future prospects in the country.

McDonald's China announced later last year its plan to speed up its expansion to lower-tier cites to attract new customers and update its menu with more nutritious and iconic food items. The company opened more than 1,000 new restaurants in China between 2017 and 2019 and there are 3,300 outlets in China at present, according to McDonald's China.

In 2017, the US chain sold most of its businesses in the Chinese mainland and in Hong Kong to CITIC and private equity group Carlyle for up to $2.1 billion. CITIC took the majority stake of 52 percent in McDonald's China operations.