CITIC (00267) intends to sell approximately 22% of McDonald’s China’s equity together with debt, involving a capital of RMB 3.7 billion
Two and a half years after CITIC’s entry into the country, the magnitude of asset appreciation obtained from McDonald’s is not high.
From a business perspective, when CITIC announced its entry into McDonald’s China in early 2017, McDonald’s China was valued at approximately 16.1 billion yuan, and the transaction was completed in July 2017.
Divestiture of non-core assets, focus on real estate
Two and a half years after joining the company, the base price of CITIC’s shareholding reduction is 2.17 billion yuan, which is equivalent to McDonald’s China’s overall valuation of only 9.86 billion yuan (about 11 billion Hong Kong dollars). After the debt was priced at 3.698 billion yuan, McDonald’s China was valued at about 16.8 billion yuan (about 18.8 billion Hong Kong dollars).
Reflected in the above transaction base price, during the CITIC’s holding period, McDonald’s China’s valuation increased by approximately 16.8%, with an annualized return of approximately 6.4%, and the profit was not considered generous. However, the final profit margin of CITIC still depends on the premium of the final transaction price over the reserve price.
Since the completion of CITIC’s overall listing, Chairman Chang Zhenming has repeatedly emphasized the need to increase the profit contribution of the non-financial industry
In the past few years, McDonald’s China equity has been one of the purchases of a large number of non-financial assets. However, due to too much business, there has been a discount on the stock price. I believe that this time CITIC is willing to sell McDonald’s shares at a low price. It has little to do with the return. Instead, it resembles a structural reorganization, gradually stripping non-core assets and refocusing In core businesses such as real estate and finance.