Maeil Dairies close to McDonald’s Korea deal

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Maeil Dairies close to McDonald’s Korea deal

A consortium comprising Maeil Dairies and U.S. private equity fund Carlyle Group is the sole bidder remaining to acquire McDonald’s Korea, industry sources said Tuesday.

Maeil Dairies, the nation’s leading dairy manufacturer, became the only bidder standing for the American hamburger giant’s local franchise after its key rival consortium NHN Entertainment and its equity partner KG Group dropped out. “We don’t want to go beyond our capability to meet the excessive requirement set by McDonald Korea,” the consortium said Monday.

CJ Group, Korea’s leading entertainment and food conglomerate, was a preferred bidder to acquire the fast-food franchise, but also withdrew from the race, reportedly citing the high price demanded from McDonald’s.

Industry insiders say although McDonald’s Korea has had an operating loss for the last few years, its team up with Maeil Dairies, which has been expanding its business portfolio to the food industry, may bring a win-win.

Maeil Dairies currently provides milk and cheese to McDonald’s 430 local restaurants. It provides lettuce and buns for the hamburger places through U.S.-based bakery East Balt. Maeil holds 20 percent of the shares in East Balt’s Korean branch.

“The vertical integration of production processes at McDonald’s may help Maeil Dairies to obtain relatively larger profit [compared to previous bidders],” said one analyst who declined to be named.

Maeil Dairies has long expanded its presence in the local food industry as the operator of Italian pizza place Salvatore Cuomo and Chinese restaurant Crystal Jade. The dairy company provides wine to the pizzeria through its affiliated wine importer and distributor Les Vin de Maeil. It also operates coffee franchise Paul Bassett, which has some 70 branches nationwide.

On the back of solid expansions of its business portfolio, Maeil Dairies posted 17.1 billion won ($15.5 million) in operating profit in the first half of this year, a 125 percent year-on-year increase. Last year, Maeil Dairies posted just 7.6 billion won in profit amid dwindling demand for milk products.

Shares of Maeil Dairies inched up 0.42 percent Tuesday from the previous trading day to close at 35,650 won.

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