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McDonald's pays $1.8B to buy back Carlyle's China stake

Illustration of a burger stacked high with money

Illustration: Sarah Grillo/Axios

McDonald's paid $1.8 billion for Carlyle's minority stake in a group that operates the chain's business in mainland China, Hong Kong and Macau, per a source familiar with the deal

Why it matters: The deal comes as many PE and VC firms are pulling away from China, in part due to fears that they won't have exit avenues.

Details: McDonald's approached Carlyle with an unsolicited bid, as reported yesterday.

  • The stake represents a 28% position, and the transaction gives a 6.7x multiple on invested capital (MOIC) for Carlyle.
  • The business will continue to be majority-owned by CITIC Capital.

Between the lines: In this case, a fairly vanilla corporate carveout resulted in significant return on investment — even if it was about fries instead of chips.

What we're watching: Is this a prelude to McDonald's buying out CITIC's stake, or something equally momentus, such as an eventual IPO?

Our thought bubble: Despite all the hand wringing over U.S. and China relations, with this move McDonald's indicates it's not worried about that interfering with its expansion there.

Of note: Yum China's net revenue grew 9%, or 15% in constant currency, while same store sales increased 4% year over year in Q3, showing continued demand for American fast food in that market.

McDonald's did not immediately respond to a request for comment on whether it planned to stay pat following this transaction or if it could make additional moves.

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