McDonald's to Sell Korean Business?! Handover Price Reaches 25 Billion!

Amid rising labor costs and intense competition in food delivery, American fast-food giant McDonald's is selecting more than 10 candidates from South Korean private equity funds and mid-sized companies to sell the management rights of its South Korean operations, with an initial bidding process scheduled for next month.

According to South Korea's Maeil Business Newspaper, McDonald's is considering selling its South Korean business. The report, citing anonymous investment banking sources, stated that McDonald's sent preliminary letters to about 10 potential buyers last month regarding the sale, with initial bids expected to be received in October.

The transaction target consists of 100% of McDonald's South Korea owned by McDonald's Singapore Investment, along with the domestic operating rights in the country. This marks the American fast-food giant's second attempt to sell its South Korean operations. As early as 2016, McDonald's engaged in lengthy negotiations with Maeil Dairies and the Carlyle Group, but the buyers chose to withdraw over the high asking price and other concerns, leaving McDonald's unable to sell the business at that time.

According to a September 5th report by South Korean media outlet Maeil Business Newspaper, the current valuation of McDonald's South Korea operations is approximately 500 billion Korean won (equivalent to 2.53 billion RMB), close to the valuation from six years ago.

McDonald's was one of the first American fast-food brands to enter South Korea, arriving in 1986, and it remains the fast-food chain with the highest number of stores in the country today, holding a dominant position. For that reason, some mid-sized companies hoping to enter the food and beverage industry are considering joining the bidding. Given that McDonald's operates within many commercial districts, McDonald's South Korea is emphasizing the real estate value of its store locations as a key selling point.

Despite McDonald's leading position in South Korea today, its South Korean operations recorded an operating loss of 27.7 billion Korean won and a net loss of 34.9 billion Korean won in 2021, on sales of 867.8 billion Korean won. High delivery service fees and soaring labor and raw material costs have pushed the operations into the red.

To address the surge in costs, McDonald's South Korea announced price increases on August 19th, raising prices on 68 items including beverages and desserts, with an average increase of 4.8%. This marked the second price increase by McDonald's South Korea within six months.

Image source: Internet

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