Trustar Capital Strategizes Continuation Fund for McDonald's China Stake Amid Volatile Markets

Trustar Capital is reportedly devising a continuation fund, allowing a strategic sell-down of its McDonald's China stake, offering investors a promising liquidity opportunity amidst uncertain capital markets.

Under the proposal, Trustar, formerly CITIC Capital, intends to transfer equity interest from its private equity (PE) fund to the continuation fund. This new investment vehicle will effectively manage the asset, empowering Trustar to maintain long-term improved speed and performance.

During the fundraising process for the continuation fund, limited partners or investors in Trustar's PE fund will have the option to sell their shares in McDonald's China and cash out, offering them an attractive liquidity opportunity. Preliminary discussions have taken place with the Singaporean and Abu Dhabi sovereign wealth funds GIC and Mubadala, among others, who have expressed interest in being anchor investors.

Notably, this move exemplifies how private equity firms are exploring alternative liquidity options in the face of volatile capital markets and higher interest rates, which pose challenges for traditional options such as initial public offerings or sales.

The size and structure of the continuation fund are still being finalized, although the owners are aiming for a $10 billion valuation for McDonald's China as part of the process. Trustar plans to engage secondary investment-focused funds to participate in the upcoming roadshows, further expanding the range of potential investors.

To complement this development, Trustar is also contemplating rolling some of its holdings in McDonald's China into a new private equity fund. This dual-strategy approach underscores Trustar's commitment to maximizing value and sustaining long-term growth.

Carlyle Group and CITIC own 28% and 10% of McDonald's China, respectively, while Trustar retains the majority stake of 42%. In 2017, Trustar joined forces with CITIC and Carlyle to acquire an 80% stake in McDonald's China for up to $2.1 billion.

While Trustar declined to comment on these plans, McDonald's China expressed confidence in its long-term sustainable growth prospects within the country.

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