Two years after CITIC Holdings (00267) acquired the China-Hong Kong McDonald’s business, it decided to sell part of its equity
Listed on the Beijing Equity Exchange, CITIC sells 42.31% of Fast Food Holdings Limited (FFH) indirectly holding China and Hong Kong McDonald’s, which is equivalent to 22% of McDonald’s China and Hong Kong business. The total is about 3.7 billion yuan. At the same time, Foreign News quoted CITIC’s fellow companies and CITIC Capital, which now owns 20% of China and Hong Kong’s McDonald’s, stated that it has confidence in McDonald’s China’s prospects and intends to increase its holdings and will actively participate in the acquisition.
In response to the sale, CITIC shares pointed out that the transaction is purely a commercial decision. In the future, CITIC and its partners will continue to work hard and benefit from the development of McDonald’s China.
CITIC also said that since the acquisition in 2017, the company has used unique platforms and rich resources to work with partners and McDonald’s to promote the development of McDonald’s business in the Mainland and Hong Kong, especially the location of new stores, the cooperation in finding takeaway services, and the promotion of digital Retail experience. During the period, there were more than 1,000 new restaurants in China and Hong Kong McDonald’s, and revenue and profit also recorded growth.
In January 2017, CITIC Capital, CITIC Capital and Carlyle, through a joint venture company, Grand Foods Investment Holdings Ltd, acquired McDonald’s China and Hong Kong business interests and franchise rights for the next 20 years at a price of 16.1 billion yuan.
Business decisions do not affect operations
CITIC and CITIC Capital hold 52% of Grand Foods Investment through FFH, while Carlyle and McDonald’s subsidiaries hold 28% and 20% equity, respectively.
Data show that CITIC and CITIC Capital respectively hold 61.5% and 38.5% of FFH, which is equivalent to 32% and 22% of McDonald’s China-Hong Kong business.
McDonald’s said that CITIC Capital, Carlyle and McDonald’s Global had been informed of and agreed to the sale of CITIC shares. After the transaction is completed, CITIC will continue to hold a 10% stake in the joint venture. This is a purely commercial decision. The related transaction will not affect McDonald’s China-Hong Kong business strategy and daily operations.
Only two years after purchase
CITIC shares will be recovered together with debts in the equity transaction. According to the property rights transfer information of the Beijing Equity Exchange, as of the end of November last year, FFH owed shareholders a total of HK $ 2,462 million, and CITIC will transfer this equity, recovering a shareholder loan of HK $ 1,693 million corresponding to a shareholding ratio of 42.31%, equivalent to RMB 1.526 billion.
In fact, CITIC bought China and Hong Kong McDonald’s for only two years at a high price, but its business performance was mediocre. According to the Beijing Equity Exchange, as of the end of November last year, FFH’s operating income was HK $ 24.39 billion and net profit was HK $ 856 million; the 2018 operating income and net profit were HK $ 24.781 billion and HK $ 1.152 billion, respectively.
