Chinese state-owned conglomerate Citic Ltd (中信集團) is planning to significantly reduce its stake in McDonald’s China Co more than two years after it bought into the fast-food chain, as rising costs pinch the franchise’s profit.
McDonald’s China said in a statement yesterday that Citic is looking for buyers for a 22 percent stake, which would bring its share in the chain’s China operations down to 10 percent.
The bottom price for the stake is set at 2.17 billion yuan (US$312 million) and the bidding process is ongoing, said a disclosure document filed by Citic to the Beijing Equity Exchange.
Separately, Citic Capital Holdings Ltd (中信資本) — partly owned by Citic Ltd — said it is interested in buying the stake. It owns 20 percent in McDonald’s China.
“Citic Capital is confident with the future growth and prospects of the business and we’re actively participating in the bidding process,” a Hong Kong-based company spokeswoman said.
Citic Ltd said in an e-mailed statement that the transaction was “purely a business decision.”
Citic and its partners would continue to benefit from the development of McDonald’s China, it said.
Citic Ltd said Chicago-based McDonald’s Corp holds a 20 percent stake in the China business.
The stake sale comes as the fast-food chain saw revenue and profit growth stall amid fierce competition in China’s dining scene.
Food chains have also been affected by increasing costs due to the African swine fever epidemic, which has wiped out one-quarter of the world’s pigs and caused animal protein prices in China to surge.
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 last year, it was 24.4 billion yuan.
Operating profit for the first 11 months of last year 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 and 1.15 billion yuan, respectively, for all of 2018.
McDonald’s China said that same-store sales have risen for three years consecutively since Citic and its partners bought over the franchise in 2017.
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