HONG KONG — McDonald’s Corp. has agreed to sell the bulk of its China and Hong Kong business to the state-backed conglomerate Citic Ltd and Carlyle Group LP for up to $2.1 billion, seeking to expand rapidly without using much of its own capital.

The 20-year deal caps months of negotiations between the fast-food chain, private-equity firms including Carlyle and TPG Capital Management LP, as well as several Chinese suitors.

The US fast-food chain said local partners would help speed up growth in the world’s No. 2 economy through new restaurant openings, particularly in smaller cities that are expected to benefit from increased urbanization and income growth.

“McDonald’s globally overall is struggling and didn’t have the money or intellectual resources to focus on China,” said Shaun Rein, a managing director at China Market Research Group.

The company has more than 2,400 restaurants in mainland China and roughly 240 in Hong Kong. The new partnership plans to add 1,500 in the two areas over the next five years.

Under the deal, Hong Kong-listed Citic Ltd will own about 32% of the business, with Citic Capital, an affiliate company that manages private-equity funds and other alternative assets, holding another 20%.

Carlyle will control 28% of the business, while McDonald’s will retain a 20% stake, the companies said in a statement. The deal will be settled in cash and in shares in the new company that will act as the master franchisee for the 20-year period.

McDonald’s originally wanted to raise up to $3 billion from the sale of the business but later decided to keep a minority stake to benefit from exposure to future growth in China, a person with direct knowledge of the plans previously told Reuters.

The partnership will also aim to boost sales at existing restaurants, with menu innovation a key focus. Fast-food firms including McDonald’s and Yum Brands Inc. are recovering from a series of food-supply scandals in China that have undermined their performance.

“I’m not sure how much more you can do with McDonald’s in China,” Rein said. “They’re a well-run company, so I’m not sure that Citic and Carlyle are able to add that much more aside from capital.”

McDonald’s said in March it was reorganizing operations in the region, looking for strategic partners in China, Hong Kong, and South Korea. The company later decided to keep its South Korea business.

Other companies that had bid for the China and Hong Kong assets included TPG, which teamed up with the mini-market operator Wumart Stores Inc., and the real-estate firm Sanpower Group Co. Ltd, which owns British department store House of Fraser Ltd, sources have said.

JPMorgan Securities is advising the buyer group, while Citic Ltd also said it hired Citic CLSA Capital Markets as its financial adviser and Citic Securities as financial adviser in China. McDonald’s hired Morgan Stanley to run the sale.

(Reporting by Elzio Barreto; Additional reporting by Jessica Yu and Donny Kwok in Hong Kong and Rushil Dutta in Bengaluru; Editing by Edwina Gibbs)

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