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Food & Beverage

McDonald's to draw down stake in Japanese unit to 35%

US fast-food giant grants strong-performing Japan business greater independence

U.S. burger chain McDonald's will reduce its interest in the Japanese unit while maintaining veto power over special resolutions.   © Reuters

NEW YORK -- The U.S. fast-food chain McDonald's will sell off a significant chunk of shares held in McDonald's Holdings (Japan), a move that will grant its cross-Pacific counterpart greater independence to recover amid a pandemic.

McDonald's, which currently holds 49.99% ownership in McDonald's Japan, will sell about a 15% stake, the American company said Monday during a second-quarter earnings call. The shares are held via Canadian and Singaporean units.

"As a result of the strong performance of the McDonald's Japan business over the past few years, and our confidence in the local management team, we believe it's the right time to gradually reduce our ownership stake in the market," said Kevin Ozan, McDonald's chief financial officer.

The 35% stake remaining will still grant McDonald's status as the principal investor, as well as the one-third veto power over special resolutions in shareholders meetings.

The decision to retain the 35% demonstrates McDonald's "commitment to our Japanese business," Ozan said.

Formally known as McDonald's Holdings Co. (Japan), the company now runs about 2,900 restaurants in Japan, attaining a footprint third in size following China and the U.S. McDonald's receives a fee equivalent to 3% of McDonald's Japan's revenues, and it has the right to appoint members to the Japanese unit's board.

A problem with tainted Chicken McNuggets put McDonald's Japan through two years of net losses through 2015. Beginning in 2016, the company staged a sharp rebound that continues to this day. The stock price touched a new all-time high in June.

McDonald's has not disclosed the dates it will divest the shares or the method. Ozan says the process will take time due to the thin trading volume of Japanese equities. The funds recouped will be allotted in part to growth investments, dividends and debt payments.

Because of the pandemic, McDonald's is undergoing a restructure that includes the closures of 200 restaurants. The company will rebuild its global management structure with an eye toward shaking up its financial and investment strategy.

McDonald's Japan was founded by the late entrepreneur Den Fujita in 1971. Ownership of the venture was split half-and-half between McDonalds of the U.S. and Fujita's eponymous trading business, Fujita & Co.

In 2003, Fujita stepped down as chairman of McDonald's Japan and dissolved the contract signed onto by Fujita & Co. That granted the U.S. partner greater say in McDonald's Japan's day-to-day management.

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