McDonald’s Said to Narrow Bidders for $2 Billion China Franchise

McDonald's Narrows China Franchise Bids
  • Fast-food chain invites Cinda, Sanyuan to make binding offers
  • GreenTree Hospitality, Sanpower also among shortlisted bidders

McDonald’s Corp. selected bidders including China Cinda Asset Management Co., the nation’s second-biggest bad-loan manager, and dairy producer Beijing Sanyuan Foods Co. to make binding offers for its operations in China and Hong Kong, people with knowledge of the matter said.

Sanpower Group Co., the Chinese owner of U.K. department store House of Fraser, and GreenTree Hospitality were also invited to submit second-round bids in September, according to the people. McDonald’s is selling 20-year mass franchise rights in China and Hong Kong, which could fetch about $2 billion, the people said, asking not to be identified as the information is private.

McDonald’s is revamping its ownership structure in Asia as it pursues an international turnaround plan put in place after Chief Executive Officer Steve Easterbrook took the reins last year. The fast-food chain said in March it is seeking franchise partners in mainland China, Hong Kong and South Korea to invest fresh capital and facilitate local decision-making.

“Refranchising has been a big trend in the last two years, and it just kind of continues that trend,” said Jennifer Bartashus, a Bloomberg Intelligence analyst. “You shift a lot of the operational risk onto the franchisee.”

‘Ideal Time’

Unlike in its other major markets -- including the U.S.-- most McDonald’s outlets in north Asia are company-owned. The fast-food chain aims to eventually have 95 percent of its restaurants in the region under local ownership, it said in March. With the financial health of Chinese consumers uncertain as the nation’s economic growth slows, “it’s kind of an ideal time to go into this transition,” Bloomberg Intelligence’s Bartashus said.

Shares of McDonald’s rose 0.2 percent to $120.92 at the close in New York on Thursday. The stock has gained 2.4 percent this year, lagging the benchmark Standard & Poor’s 500 Index’s 2.6 percent advance.

China National Chemical Corp., known as ChemChina, didn’t proceed to the second round, the people said. The state-owned enterprise, which agreed to buy Swiss pesticide maker Syngenta AG for about $43 billion in February, was among companies considering bids for the Chinese operations of McDonald’s, people with knowledge of the situation said last month.

Joint Bids

A representative for Sanyuan Foods said she couldn’t immediately comment. Spokesmen for Cinda, McDonald’s and Sanpower declined to comment. A representative for GreenTree didn’t respond to e-mailed questions, while a spokeswoman for ChemChina didn’t answer a phone call and e-mail seeking comment.

Cinda is bidding together with a Chinese company, two of the people said. Sanpower said last month it had submitted a joint offer with Beijing Tourism Group. 

Shares of Sanyuan Foods have risen 10 percent in Shanghai trading this year, giving it a market value of about $1.8 billion. The company’s largest shareholder is state-owned Beijing Capital Agribusiness Group, known in Chinese as Sunlon, which has a joint venture with McDonald’s that runs some of the fast-food chain’s restaurants in the Chinese capital.

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