Pure business decision CITIC plans to sell 22percent of McDonalds Chinas equity

category:Finance
 Pure business decision CITIC plans to sell 22percent of McDonalds Chinas equity


The target company of this listing is the largest shareholder of McDonalds China Management Co., Ltd. (hereinafter referred to as McDonalds China), which holds 52% of McDonalds Chinas equity, and the listing party is CITIC Corporation. Overall, the listing involves 22% of McDonalds Chinas shares actually controlled by CITIC.

To this end, McDonalds China and CITIC both responded that this transaction is purely a business decision. In the future, CITIC and its partners will continue to be committed to and benefit from the development of McDonalds China. After the completion of the transaction, CITIC will continue to hold 10% of McDonalds China.

Sale on sale

McDonalds China 22%

According to the announcement of Beijing Equity Exchange, fastfood Holdings Limited has only two shareholders: starry dream Investments Limited with 61.54% shares and ccpfast Food Holdings Limited with 38.46% shares.

It is understood that the above two shareholders are CITIC shares and companies under CITIC Capital. The transferor of this equity is starry dream of CITIC, which plans to transfer 42.31% of fastfood Holdings Limited.

Fast Food Holdings Limited is the largest shareholder of McDonalds in China, holding 52% of the companys equity. The latter is a joint venture established by CITIC, Carlyle and McDonalds.

According to the announcement, the transfer base price of the project is RMB 2.172 billion, which is calculated from the equivalent US $316 million according to the central banks foreign exchange middle rate published on June 28, 2019.

In addition, as of the end of November 2019, fastfoodholdings Limited has borrowed 2.462 billion Hong Kong dollars from the transferors shareholders, and the transferor will recover the corresponding shareholder loan of 1.693 billion Hong Kong dollars corresponding to 42.31% of the shareholding ratio with this equity transfer, which will be converted into 217044500 US dollars, equivalent to 1.526 billion RMB yuan.

This means that the intended transferee who intends to purchase this equity will pay a total of about 532.9827 million US dollars, equivalent to the transfer consideration of 3.698 billion yuan.

According to the announcement, fastfood Holdings Limited achieved an operating revenue of 24.781 billion Hong Kong dollars and a net profit of 1.152 billion Hong Kong dollars in 2018. In the first 11 months of 2019, the companys operating revenue was HK $24.39 billion and its net profit was HK $856 million, slightly lower than that of the same period last year.

By the end of November 2019, the companys total assets were HK $30 billion, an increase of 48.5% over the beginning of the year, and its total liabilities were HK $23.388 billion, an increase of 60.2% over the beginning of the year.

Choose to sell after 3 years

This part of the equity transferred by CITIC shares stems from a large transaction in 2017.

In January 2017, CITIC Corporation announced that CITIC Corporation, CITIC Capital and Carlyle intend to acquire the controlling interests of McDonalds business in mainland China and Hong Kong through grandfoods Investment Holdings Limited for us $2.08 billion.

In fact, McDonalds had received bids from China National Chemical Corporation, Bain Capital, first travel group and other capitals.

It is understood that in this transaction, CITIC shares, CITIC Capital and Carlyle purchased all issued shares of McDonalds China for a total consideration of up to US $2.08 billion, so as to obtain the operation rights of McDonalds restaurants in mainland China and Hong Kong for 20 years.

After the completion of the acquisition, McDonalds China will be held by Fast Food Holdings Limited (with CITIC shares and CITIC Capital indirectly holding about 61.54% and 38.46% respectively), Carlyle Asia Fund and Gail holding 52%, 28% and 20% respectively.

In August 2017, CITIC announced that the acquisition had been completed by the end of July 2017. After the delivery, McDonalds China became an indirect non wholly owned subsidiary of CITIC.

If the deal is finally completed, CITICs investment will also yield good returns. According to the 2017 annual report of CITIC, the transaction cost of the 61.54% equity of fastfood Holdings Limited acquired by CITIC at that time was US $309 million, and the converted 42.31% equity was about US $212 million.

Compared with the base price of the 42.31% equity listed transfer (US $316 million), if the transfer is successful, this part of CITICs equity investment will obtain about 49% of the income.

Multi response:

Pure business decision

In response to the listing, including CITIC shares, McDonalds China and other multiple choice responses, said purely commercial decision..

CITIC responded that since 2017, the company has actively promoted McDonalds business development in mainland China and Hong Kong with its partners and McDonalds by taking advantage of platforms and resources, especially in new store location, search for delivery service partners and improve digital retail experience. During the period, McDonalds has more than 1000 new restaurants in mainland China and Hong Kong, and its overall revenue and profit have also increased significantly.

CITIC said that the sale of McDonalds China equity is purely a business decision. In the future, CITIC and its partners will continue to be committed to and benefit from the development of McDonalds China. McDonalds China also said that the transaction was purely a business decision. After the completion of the transaction, CITIC will continue to hold 10% of the equity of the joint venture company, and will continue to work with partners to benefit from the development of McDonalds. At present, CITIC Capital, Carlyle and McDonalds hold a total of 68% of the controlling shares of the joint venture globally, and the related transactions will not affect McDonalds business strategy and daily operation in mainland China and Hong Kong. McDonalds China responded. In addition, CITIC Capital, another major shareholder of McDonalds China, responded that CITIC Capital is confident that McDonalds China will continue to grow and will actively participate in the share bidding. Source: responsible editor of Securities Times: Yang bin_nf4368

CITIC said that the sale of McDonalds China equity is purely a business decision. In the future, CITIC and its partners will continue to be committed to and benefit from the development of McDonalds China.

At present, CITIC Capital, Carlyle and McDonalds hold a total of 68% of the controlling shares of the joint venture globally, and the related transactions will not affect McDonalds business strategy and daily operation in mainland China and Hong Kong. McDonalds China responded.

In addition, CITIC Capital, another major shareholder of McDonalds China, responded that CITIC Capital is confident that McDonalds China will continue to grow and will actively participate in the share bidding.