Daily Management Review

McDonald’s to shake off its Japanese business


American corporation McDonald's, the world's largest fast food restaurant chain, started to accept offers for a large share of its Japanese unit.

The operator of fast food restaurants owns slightly less than 50% in this division through its affiliates. The Japanese business is listed on the Tokyo Stock Exchange, and its market capitalization amounts to $ 3.5 billion. According to some sources, McDonald's wants to sell up to 33% in the division.

A number of investment funds is already planning to file applications. The sale is organized by Morgan Stanley, one of the sources added.

McDonald's spokesman said the company continues to explore possibility of selling part of its stake in McDonald's Japan, but has not yet taken any decision.

The transaction has already got interested a number of private companies. Offers to buy shares of McDonald's Japanese business will start to arrive next week. 

A spokesman for McDonald's told The Wall Street Journal that the corporation continues to consider selling part of its business in Japan, but the final decision on the matter is currently pending.

McDonald's announced plans to sell part of its Japanese business in late 2015. December 22, newspaper Nikkei Asian Review reported that the corporation may sell up to 33% stake in its Japanese business for $ 824.6 million. Then, capitalization of McDonald's Japan on the Tokyo Stock Exchange was $ 3.21 billion.

During the first nine months of 2016, net profit of McDonald's Japan was 3.21 billion yen ($ 27.6 million) against a net loss of 29.28 billion yen ($ 252.4 million) for the same period of 2015.

McDonald's decision reduce stake in its Japanese business followed its earlier announcement on sale of 80% of its unit in China for an estimated amount of up to $ 2 billion. Now, operators of fast food restaurants around the world are giving up assets to focus on management of their brands. This model allows companies to receive a percentage of sales with no associated costs and problems related to management of hundreds of restaurants.

McDonald's previously laid a reserve of $ 235 million for costs of franchise sale of 4 th. its restaurants by 2018.

According to The Wall Street Journal, this amount includes some costs associated with relocation of the company’s headquarters in downtown Chicago. For the quarter, earnings per share of these costs will be reduced by approximately $ 0.2.

Once the restaurants are sold, entrepreneurs will own 93% of the enterprises. McDonald's management sees the end result as a figure of 95%.

The restaurant chain plans to reduce costs by $ 500 million per year, bulk of the reductions scheduled for 2017.

source: wsj.com

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