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McDonald's boosts stake in China business, eyes expansion

EditorRachael Rajan
Published 11/20/2023, 12:22 PM
© Reuters.

In a strategic move to reinforce its presence in the fast-growing Chinese market, McDonald's Corporation (NYSE:MCD) has increased its ownership interest in its China joint venture. The company confirmed today that it has bought out Carlyle’s stake, raising its share to 48%, while CITIC Consortium will continue to hold the majority interest at 52%.

The acquisition is part of McDonald's "Accelerating the Arches" growth plan, which has already seen the number of its restaurants in China surpass 5,000 since 2017. This expansion has been coupled with significant sales growth over the past three years. Carlyle Asia has recognized the collaborative efforts that have enhanced digital marketing and customer engagement leading up to this transition.

CITIC Capital’s CEO expressed enthusiasm about scaling operations toward an ambitious goal of more than doubling the current number of outlets by 2028. This aligns with McDonald’s broader strategy to leverage local partnerships and insights while maintaining a global brand presence.

The transaction is expected to be completed by the first quarter of next year, pending regulatory approvals. McDonald’s emphasis on entrepreneurial franchisees running its global chain is evident in this move. The deal comes as McDonald's continues to report strong financial performance, with both Carlyle and CITIC Capital bringing considerable financial expertise to the table.

In conjunction with this corporate maneuver, market analysts have maintained a Strong Buy consensus on McDonald's stock (NYSE:MCD), projecting an expected upside of 12.3% with a target stock price of $310.42. The company's strategic investments and operational milestones in China are likely contributing factors to this positive outlook.

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InvestingPro Tips further highlight McDonald's strengths. The company has a perfect Piotroski Score of 9, suggesting strong financial health. Over the past 48 years, McDonald's has consistently raised its dividend, reflecting a stable and growing income for shareholders. Additionally, 15 analysts have revised their earnings upwards for the upcoming period, indicating a positive market sentiment towards McDonald's future performance.

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