Fast-food giant McDonald’s Corp has received final offers from at least three bidding groups for its China and Hong Kong outlets, with global private equity firms Carlyle Group and TPG Capital teaming up with Chinese partners for the business worth up to $3 billion, sources told Reuters.
Carlyle has joined with Chinese state conglomerate CITIC Group, while TPG has teamed up with mini-market operator Wumart Stores on their separate bids for the 20-year franchise, said the sources, who declined to be named.
See also: CITIC and Carlyle Reportedly Partner to Bid for McDonald’s in China
Real estate firm Sanpower Group, which owns British department store House of Fraser, also made an offer for the assets, one of the sources said. The company has previously said it was teaming up with Beijing Tourism Group.
Based on the final bids, McDonald’s (MCD) may end up working with the unlikeliest of franchise partners. Both iron-ore to financial conglomerate CITIC and real estate to technology group Sanpower have little experience in the restaurant business.
Illinois-based McDonald’s announced in March it was reorganizing its Asian operations, bringing in partners as it switches to a less capital-intensive franchise model.
Reuters previously reported that the company had hired Morgan Stanley to run the sale of about 2,400 restaurants in China and Hong Kong.
The CITIC-Carlyle team is seen as the front runner to win the auction, one of the sources said.
Carlyle and TPG have taken on only minority stakes in the bidding vehicles as McDonald’s has said it prefers long-term partners, whereas buyout firms typically cash out after a few years.
Beijing Capital Agribusiness Group, which is McDonald’s current China partner, and China Cinda Asset Management were previously in the running, though it was not clear if they had made final offers by the close of bidding on Wednesday.
The planned deal comes at time when fast food operators including McDonald’s and arch-rival Yum Brands are recovering from a series of food-supply scandals in China that have undermined their performance.
Some analysts have said teaming up with local partners will help foreign fast food operators to navigate supply issues.
Foreign firms can also have problems dealing with government and finding suitable real estate, said Alex Wong, a director at Ample Finance Group.
“With the involvement of Chinese partners, it will make thing easier,” he said.
See also: Yum Brands Is Selling a Stake in Its China Business for $460 Million
Earlier this month, Yum (YUM), best known for KFC, Pizza Hut and Taco Bell brands, agreed to sell a $460 million stake in its China unit to investment firm Primavera Capital and an affiliate of Alibaba Group Holding Ltd.
TPG and Carlyle declined to comment on their final bids, while CITIC, Wumart and Sanpower didn’t return requests for comment during a holiday in mainland China.
McDonald’s reiterated a previous comment that it is making progress in finding a long-term partner for the assets.