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| A McDonald's branch in Seoul / Newsis |
By Anna J. Park
Dongwon Industries aims to acquire McDonald's Korea, a move seen as the group's attempt to strengthen its franchise food business. The holding company for a variety of Dongwon Group affiliates, including marine, logistics, finance, food and living businesses, is hopeful that it can create synergy through the acquisition.
Dongwon Industries shares closed at 46,700 won ($32), Monday, up 3.78 percent from the previous trading session, on a report that it joined last month's preliminary bidding for acquiring McDonald's Korea as the sole candidate.
According to the investment banking industry, both sides are now in the process of negotiating a price for the deal, following last week's first round of due diligence. The global headquarters of McDonald's currently owns a 100 percent stake in McDonald's Korea, and the selling price is estimated to be set at around 500 billion won ($399 million) or slightly lower.
Dongwon Industries acknowledged that it joined the preliminary bidding as the sole candidate while declining to comment further.
If the deal is signed, Dongwon Industries will exclusively own McDonald's business in Korea. It will need to pay a 5 percent royalty to the U.S. headquarters of McDonald's.
This is the second time that the global headquarters of McDonald's has attempted to sell its Korean business. In 2016, it tried to sell it to a consortium of Carlyle and Maeil Dairies, but failed to reach an agreement.
Having logged three consecutive years of net losses, McDonald's Korea was put up in the local M&A market last June. Despite posting a record-high annual revenue of 867.9 billion won in 2021, a 9.7 percent increase from the previous year, the company still posted a 27.8 billion won operating loss.
It is Dongwon Industries' first major M&A attempt since last November when it became Dongwon Group's holding company after merging with Dongwon Enterprise. At the time, the holding company vowed to make a large investment to secure growth engines for its affiliates.
Other than McDonald's, major burger chains including Burger King and Mom's Touch are in search of new owners. KFC Korea, meanwhile, has recently designated Orchestra Private Equity as its preferred bidder.
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