A Chinese consultancy that has previously helped win antitrust battles against Coca-Cola and Apple has taken aim at McDonald’s Corp, arguing in a complaint to regulators that the US-based fast-food giant’s China sale may hurt workers and consumers. McDonald’s said last month that it had agreed to sell the bulk of its Chinese mainland and Hong Kong business to State-backed conglomerate CITIC and US private equity firm Carlyle Group LP for up to $2.1 billion, in a deal that will see the consortium act as the master franchisee for a 20-year period…Full Article: The Global Times Feb 2017

Key Point

  • The Beijing-based Hejun Vanguard Group filed two complaints against McDonald’s China claiming that the deal would negatively impact 120,000 Chinese employees of the fast-food giant, and that McDonald’s itself failed to properly register all of its restaurants in China.

ChinaAg Comments

  • In January 2017, McDonald’s announced it would sell 80% of Chinese operations (including Hong Kong). As a result of the US$2.08 billion deal, China’s CITIC will have a 52% stake while USA’s Carlyle Group will have a 28% stake. McDonald’s will retain a 20% stake.
  • In December 2016, McDonald’s selected USA’s Carlyle Group and its Chinese partner CITIC Group to purchase its franchises in mainland China and Hong Kong for approximately US$2 billion. The bidding prices for McDonald’s China fell roughly from US$3 Billion to US$2 Billion after McDonald’s decided to retain a 25% stake. McDonald’s also decided to not sell its South Korean fast food outlets. During the same month, McDonald’s announced plans to begin online-to-offline (O2O) strategy to allow customers to digitally order, pay, and customize their meal. The pilot phase of the O2O strategy will cover 1,000 restaurants (~40% of its restaurants) located across 13 Chinese cities.
  • In October 2016, Wumart’s bidding partner, the California-based private equity firm TPG Capital, exited the bidding process for McDonald’s China. The remaining bidders included Bain Capital and Green-Tree Hospitality (partners), Carlyle Group and CITIC Group Corp. (partners), Wumart Stores Inc. (former partner of TPG Capital), and Beijing Sanyuan Group (see  Beijing Capital Agribusiness Group).
  • In June 2016, McDonald’s Corporation was exploring selling its mainland Chinese and Hong Kong stores. Potential bidders include Bain Capital, TPG Capital, Carlyle Group, Beijing Capital Agribusiness Group, and GreenTree Hospitality.
  • In April 2015, McDonald’s announced it would close dozens of its restaurants in mainland China. As of mid-2015, McDonald’s China had more than 2,000 restaurants.
  • In November 2014, McDonald’s China’s supply chain came under increased scrutiny after the US Department of Agriculture approved a genetically modified (GM) potato developed by J.R. Simplot, a McDonald’s supplier.
  • In August 2014, McDonald’s in Hong Kong stopped selling fresh corn cups, green salad and fresh lemon tea as these items were primarily sourced from OSI processors in Hebei and Gaungzhou.
  • In July 2014, Shanghai Husi, a division of US-based OSI Group LLC, was found to have sold expired meat to McDonald’s, Pizza Hut, Papa John’s, Seven-Eleven and FamilyMart (Japan-based convenience store).
  • Founded in 2009 and headquartered in Beijing, Beijing Capital Agribusiness Group is a conglomeration of Beijing Sanyuan Group (Dairy), Beijing Huadu Group (Poultry), and Beijing Dafa Livestock. Beijing Sanyuan (SHA:600429) is its only publicly traded company in the group and was the only major dairy that was not implicated in the 2008 melamine scandal.
  • Founded in 1994 and headquartered in Beijing, Wumart is one of China’s leading retail chains. Their outlets are primarily located in the northern provinces of Beijing, Zhejiang, Tianjin and Hebei.
  • In October 1990, McDonald’s opened its first restaurant in mainland China (Shenzhen, Guangdong Province). In April 1992, McDonald’s opened its first restaurant in Beijing.
  • In 1975, McDonald’s opened its first restaurant in Hong Kong.

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