Saturday, January 14, 2017

Carlyle to McPEU in China

The Carlyle Group and Citic Capital purchased 80% of McDonald's China business, which has more than 2,400 outlets.  Chinese government backed Citic Ltd./Citic Capital Partners will own 52% and Carlyle 28%.  McDonald's will retain a 20% interest.  The deal is valued at $2.08 billion.

Bloomberg reported:

The McDonald’s transaction is Carlyle’s second-biggest deal in China, trailing only its investments in China Pacific Insurance Group Co., according to a person with knowledge of the matter. The U.S. private-equity firm invested a total of more than $700 million in China Pacific Insurance in 2005 and 2007, the person said, asking not to be identified because the information is private. A spokeswoman for Carlyle declined to comment.
Carlyle's China Pacific investment returned huge profits.  China Daily reported in 2013:

Carlyle began selling its stake in the insurer in late 2010. It earned about $4 billion from stock sales over that time, five times the $800 million it had invested between 2005 and 2007 for a 17 percent stake in the Chinese firm, according to calculations by Thomson Reuters.
Did Bloomberg do Carlyle a favor by invoking the monstrously profitable China Pacific in their piece?  Might the writer get an interview with Carlyle co-founder David Rubenstein in Davos, Switzerland?

Carlyle's news release on the deal stated:

China’s consumer sector is growing rapidly, benefiting from continued urbanisation, an expanding middle class and increasing disposable household incomes
Give the PEU boys enough time and they will reverse the trend.  Private equity's rapid rise corresponds with several decades of income stagnation and American middle class decline.  The greed and leverage boys became far richer while the average person struggled.  More than once Carlyle dumped pension plans when they acquired affiliates.

Five years ago in Davos Carlyle's David Rubenstein predicted capitalism would shift to a China style, state backed model.  China President Xi Jinping will attend the World Economic Forum meeting, the first Chinese head of state to do so.  The annual gathering of global tamperers loves to talk about equality while billionaires do deals at extravagant soirees.  I'm sure Carlyle and China backed Citic are ready for more.