McDonald’s China Is Said to Attract Sovereign Wealth Funds

Customers dine inside a McDonald’s Corp. restaurant in Beijing.

(Bloomberg) — Middle Eastern and Chinese sovereign wealth funds are considering investing in McDonald’s Corp.’s China business, according to people familiar with the matter.

Firms including Mubadala Investment Co., Qatar Investment Authority and China Investment Corp. are in talks to jointly invest in the fast-food chain’s China operations as minority shareholders, the people said, asking not to be identified discussing confidential information.

A Citic consortium, which owns 52% of the business mainly through Trustar Capital, has been considering options including transferring its holding in McDonald’s China to a new investment vehicle, the people said. Such a deal would allow Trustar to pare down its stake, they said.

China is McDonald’s’ second-biggest market, with more than 5,500 restaurants and plans to expand to over 10,000 by 2028. Slow progress in negotiations with Trustar reflect a growing sense of caution among investors about prospects for growth in the country, the people said.

Negotiations are ongoing and a potential agreement could be one or two months away, the people said. Talks could also fall apart as valuation remains a key hurdle to a deal, they said.

Representatives for McDonald’s China and Trustar declined to comment, while QIA and CIC didn’t respond to queries. A Mubadala spokesperson didn’t comment on the matter, but said the company is expanding its presence in Asia and has “a strong pipeline of potential investments.”

Amid tight financing conditions and market volatility, investment firms have increasingly relied on arrangements like continuation funds as alternatives to initial public offerings or sales of their portfolio companies.

Deep-pocketed Middle Eastern wealth funds have been eyeing assets around the world, including in Asia, as part of efforts to diversify their oil-dependent economies. Mubadala, for instance, is seeking to roughly double its exposure to Asia by as soon as 2030. The Abu Dhabi fund is also considering making an investment in London’s Heathrow airport, Bloomberg News has reported.

In November, McDonald’s agreed to buy Carlyle Group Inc.’s 28% stake in the partnership that runs the restaurant chain’s business in China, Hong Kong and Macau. While the companies didn’t provide a value for the deal, people familiar with the matter told Bloomberg News at the time that Carlyle’s stake, which lifted Chicago-based McDonald’s’ holding to 48%, was worth about $1.8 billion.

–With assistance from Cathy Chan and Nicolas Parasie.

(Updates with background on Middle East Funds in eighth paragraph.)

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