TPG Capital said to exit race for $2b McDonald's China rights

Children have a birthday party at McDonald's restaurant in Beijing. The US fast-food chain is seeking to sell 20-year mass franchise rights for the Chinese mainland and Hong Kong. [Photo/China Daily]

TPG Capital has exited the race for the McDonald's Corp China operations, leaving two other foreign buyout firms to compete with local bidders in a sale that could fetch as much as $2 billion, sources with knowledge of the process said.

Bain Capital has partnered with Chinese hotelier Green-Tree Hospitality for its offer, while Carlyle Group teamed with Beijing-based conglomerate CITIC Group Corp, the sources said. TPG's erstwhile partner, grocery operator Wumart Stores Inc, is said to be bidding on its own.

They are competing with dairy producer Beijing San-yuan Foods Co, which has also been negotiating terms of a potential deal with McDonald's, according to sources. McDonald's, which is selling 20-year mass franchise rights for the Chinese mainland and Hong Kong, plans to pick a winner by mid-November, they added.

The world's biggest restaurant chain is seeking to streamline its sprawling global operations and return to growth by revamping the ownership structure in markets such as China, South Korea and Southeast Asia. Chief Executive Officer Steve Easterbrook, who took the reins last year, is pursuing a turnaround plan to revive the company amid a sales slow-down in the United States.

"The group of potential suitors is so diverse, because Chinese companies are aggressively trying to diversify their holdings," Ben Cavender, an analyst at China Market Research Group, said on Thursday. "There is a dearth of good deals available inside the Chinese mainland."

Shares of McDonald's fell 0.5 percent to $112.11 at the close on Wednesday in New York, extending this year's decline to 5.1 percent.

Bloomberg