Carlyle and Trustar, the current stakeholders of McDonald's China, plan to exit their ownership stake for a substantial sum of $4 billion

According to sources familiar with the situation, Carlyle Group Inc. and Trustar Capital are attempting to raise $4 billion by pursuing a partial departure from McDonald’s Corp.’s businesses in Hong Kong and mainland China.

The persons claimed that GIC Pte and Mubadala Investment Co., the national wealth fund of Abu Dhabi, had been approached about the acquisition, which values the entire company at up to $10 billion including debt. The proposal has received shareholder approval, and according to asset managers who asked to remain anonymous because they were discussing private topics, they want to seal a deal with investors in the fourth quarter.

The private equity companies are establishing a new vehicle to provide existing investors a partial exit while luring new funds to support restaurant expansion. After unstable public markets and skyrocketing interest rates made exits more difficult over the past 18 months, rolling over assets into a new fund has grown in popularity as a means for buyout companies to provide liquidity for their investors.

Carlyle, Trustar, Mubadala, and GIC spokesman declined to comment.

In order to take advantage of China’s sustained growth, the fast food company plans to expand to 10,000 locations, using shareholder funds and other resources, a spokeswoman told Bloomberg.

After setting a record in 2021, Bain & Co. said that the value of exits in the Asia-Pacific region fell 33% to $132 billion last year, 1% below the previous five-year average, citing falling stock prices and listings. When funds are getting close to the end of their tenure, continuation funds give managers the ability to hold onto performing assets, enabling later exits when market circumstances improve.

In 2017, McDonald’s sold roughly 80% of its operations in China and Hong Kong for about $1.7 billion, valuing the company at up to $2.08 billion. Since then, the number of McDonald’s China locations has more than doubled to 5,400 and now includes 250 in Hong Kong. The American fast-food juggernaut intends to add 900 more locations in China this year.

Carlyle and Trustar, who control 28% and 42% of the new entity, respectively, will sell off a portion of their holdings and maybe reinvest some of the proceeds. They will continue to be in charge of running and growing the company.

One of the sponsors of Carlyle’s fourth Asia fund, which made an investment in the restaurant chain in 2017, is Singapore’s GIC.