Carlyle Group Inc. and Trustar Capital are seeking a partial exit from McDonald’s Corp.’s operations in Hong Kong and mainland China, people familiar with the matter said, in a deal that would raise $4 billion.
GIC Pte and Mubadala Investment Co., the Abu Dhabi sovereign wealth fund, have been approached about the deal that values the entire business at up to $10 billion including debt, the people said. Shareholders have agreed to the plan, and the asset managers aim to finalize an agreement with investors in the fourth quarter, they said, asking not to be identified discussing private matters.
The private equity firms are setting up a new vehicle to provide a partial exit for existing investors while attracting fresh capital to fuel restaurant growth. Rolling over assets into a new fund has become an increasingly popular way for buyout firms to generate liquidity for their investors after volatile public markets and spiking interest rates made exits harder over the past 18 months.
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Representatives at Carlyle, Trustar, Mubadala and GIC declined to comment.
The fast-food chain aims to increase its stores to 10,000, leveraging the capital and other resources from shareholders as it capitalizes on sustainable growth in China, a spokesperson said in response to Bloomberg’s inquiry.
Following a record year in 2021, the value of exits in Asia-Pacific plunged 33% to $132 billion last year, 1% below the previous five-year average, according to Bain & Co, which cited declining stock prices and listings. Continuation funds enable managers to retain performing assets when funds are nearing the end of their terms, allowing for later exits when market conditions improve.
McDonald’s sold about 80% of its China and Hong Kong operations for around $1.7 billion in 2017, valuing the business at as much as $2.08 billion. The number of McDonald’s China outlets has more than doubled since then to 5,400, along with 250 in Hong Kong. The US fast-food giant plans to open another 900 stores this year in China.
Carlyle and Trustar, which own 28% and 42% respectively, will sell down a partial stake and may reinvest some of the capital in the new vehicle. They will retain control to manage and expand the business.
Singapore’s GIC is among backers of Carlyle’s fourth Asia fund that invested in the restaurant chain in 2017.
--With assistance from Archana Narayanan, Paula Sambo, Daniela Wei and David Ramli.