Two funds set to cash in on McDonald's boom

Carlyle Group and Trustar Capital are seeking a partial exit from McDonald's Corp's operations in Hong Kong and the mainland, insiders said, in a deal that would raise US$4 billion (HK$31.2 billion). Trustar Capital is an investment arm of CITIC.

GIC and Mubadala Investment, the Abu Dhabi sovereign wealth fund, have been approached about the deal that values the entire business at up to US$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.

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.

Following a record year in 2021, the value of exits in Asia-Pacific plunged 33 percent to US$132 billion last year, 1 percent 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 conditions improve.

McDonald's sold about 80 percent of its mainland and Hong Kong operations for around US$1.7 billion in 2017, valuing it at as up to US$2.08 billion.

The number of China outlets has more than doubled since then to 5,400, along with 250 in Hong Kong. The giant plans to open another 900 stores this year in China.

Delivery services kept growing in China even amid on-and-off lockdowns.

Carlyle and Trustar, which own 28 percent and 42 percent 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.