Arcos Dorados, the developmental franchisee of McDonald’s in Latin America, was the largest McDonald’s franchise in the world and the largest restaurant chain in the region, operating McDonald’s restaurants in 19 countries and territories in Latin America and the Caribbean.
Capital Group Private Markets was the lead financial investor in Arcos Dorados and two Partners served on the board of the company until its IPO. We worked closely with the founder of McDonald’s Argentina and previous president of McDonald’s South Latin America Division from the very early stages of the structuring the transaction, including due diligence, financing, negotiation, and selection of other consortium members.
Our investment thesis was based on (i) the established franchise and strong brand value of McDonald’s in the region; (ii) the potential for margin expansion; (iii) growth opportunities in several key markets, and in segments of the quick service restaurant market (coffee stores, ice cream stands); and (iv) an attractive entry price at a reasonable discount to comparable companies. CIPEF V’s investment in Arcos Dorados was also underpinned by a strong belief in the capabilities of the Arcos Dorados management team.
In April 2011, Arcos Dorados sold $1.437 billion worth of shares, including greenshoe, in its initial public offering on the New York Stock Exchange. The shares, listed under the symbol “ARCO”, were priced $2 above the top end of the expected range, and the offering was approximately 20 times oversubscribed. At the time, the Arcos Dorados offering was the largest SEC registered Latin American IPO since 2009 and the 3rd largest SEC registered IPO out of Latin America.