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Zhong Lun Advised on CITIC & Carlyle’s Acquisition of McD’s China Mainland & Hong Kong Business 2017-08-16

 

Zhong Lun LLP advised the Consortium, consisted of CITIC Limited (SEHK:00267, “CITIC”), CITIC Capital China Partners III, L.P. (“CITIC Capital”) and Carlyle Group (NASDAQ: CG, collectively referred to as the “Consortium”) on the acquisition of McDonald's Corporation (NYSE: MCD, “McDonald’s”)’s business in China Mainland and Hong Kong (the “Acquisition”), which was closed on July 31, 2017 (the “Closing”), through Grand Foods Investment Holdings Limited for a total consideration of USD 2.08 billion (HKD 16.14 billion). Upon the Closing, the McDonald’s China Management Limited (the “Target” and together with its subsidiaries, the “Target Group”) is indirectly owned by CITIC, CITIC Capital, Carlyle and McDonald's as to 32%, 20% , 28% and 20%, respectively, and the Target Group is granted a master franchise to operate approximately 2,700 McDonald’s restaurants in China Mainland and Hong Kong for a term of 20 years pursuant to two master franchise agreements (the “MFAs”), which becomes the world's largest McDonald's franchise business outside the U.S. so far.

 

As the PRC legal counsel for the Consortium  on the acquisition, Shiwei Zhang, Partner with Zhong Lun LLP, together with his team including Xuejing Zhu, Yulin Liu, Shuo Li and Tina Zhang provided full legal services on legal due diligence, reorganization (including but not limited to equity, debts and franchise of the PRC Target Group), approval/filing procedures, transaction documents, etc.

 

According to relevant announcements and data, China mainland has become McDonald's third-largest and fastest growing market in the world, since it entered the China mainland market in 1990. As of 31 December, 2016, McDonald's operated and franchised over 2,400 restaurants in mainland China, which provided meal service to over 1 billion customers last year. In terms of CITIC, this transaction lays a deeper foundation and further develops its competitiveness in the consumer sector, which is poised to be the main driver of China’s economy in the coming years. In addition, this transaction also serves as the evidence in its efforts to better balance its financial and non-financial business.