Dongwon abandons bid to acquire McDonald's Korea

A customer receives her order at a McDonald's restaurant in Seoul, in this 2021 file photo. Courtesy of McDonald's Korea

By Kim Jae-heun

Dongwon Group has abandoned its bid to acquire McDonald's Korea, according to company officials, Thursday, citing an unresolvable disagreement with its U.S. headquarters on how to manage the fast food chain in Korea.

Dongwon Group Vice Chairman Kim Nam-jung

Dongwon Industries, the holding company of Dongwon Group, had started reviewing a possible takeover of the local branch of the U.S. fast food restaurant chain early this year, but it recently halted the negotiations.

“We will not proceed in further negotiations with McDonald's Korea due to an irreconcilable difference in our stance on contract conditions,” a Dongwon Group official said. “We cannot reveal further details due to the legal terms of the contract.”

The new buyer is required to pay about 5 percent in royalties to McDonald's U.S. headquarters under the master license agreement. Dongwon would have been required to pay $45,000 for every new store it opened here. However, the food firm is said to have opposed this condition.

In 2021, McDonald's Korea marked 867.9 billion won ($648.1 million) in sales and paid over 44 billion won in royalties to its headquarters. The company recorded an operating loss of 27.8 billion won and net loss of 34.9 billion won during the same period. From 2019 to 2021, McDonald's Korea paid about 119.9 billion won in commission fees.

The acquisition price was another point of contention.

McDonald's Korea's desired sale price is said to have been 500 billion won but Dongwon Industries proposed only 200 billion won.

A prediction had been made earlier this week that the acquisition deal would fail, as McDonald's Korea carried out a recapitalization during the negotiations. The restaurant franchise explained its paid-in capital increase was aimed at securing business funds.

McDonald's Korea declined to comment on the matter.