McDonald’s divests most of its Chinese operation

17-Jan-2017 - Last updated on 17-Jan-2017 at 07:52 GMT

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McDonald’s will sell 80% of its mainland China and Hong Kong businesses for US$1.7bn to a Chinese state-owned conglomerate and an American private equity firm.

The company currently operates more than 2400 restaurants in mainland China and 240 in Hong Kong.

The deal will give China’s CITC and the Carlyle Group franchise rights for the next two decades, and CITC a controlling stake in the business. The American fast-food chain will retain the remaining 20% of the business.

“China and Hong Kong represent an enormous growth opportunity for McDonald’s,” Steve Easterbrook, McDonald’s chief executive, said in a statement.

“This new partnership will combine one of the world’s most powerful brands and our unparalleled quality standards with partners who have an unmatched understanding of the local markets.”

McDonald’s has been clawing its way back to respectability after a string of setbacks began most prominently in 2014, when a supplier was exposed after using raw material past its use by date, and unsanitary food manufacturing practises were identified.

Its new Chinese owners say they expect to concentrate on new restaurants in smaller Chinese cities, where newfound rising middle-class incomes have been growing in prominence.

CITIC chairman Chang Zhenming said the deal was a “strategic opportunity for the company to invest in the expanding Chinese consumer sector.”