000664 McDonald's & Accel-KKR to Form Internet Firm

Chicago, IL - McDonald's Corp. and the investment concern Accel-KKR Inc. said they had agreed to form a global Internet company to help food companies cut costs.

The business-to-business venture, called eMac Digital, will be based in Chicago and will initially focus on achieving efficiencies, maximizing cost savings and creating new markets and distribution channels.

“McDonald's wants the best people and partnerships that will help ensure enduring, profitable growth for our business,” Jack Greenberg, McDonald's chairman and chief executive officer, said in a statement. “This strategic business decision is yet another step in our quest to be the best.”

A Wall Street analyst said the Internet venture will allow McDonald's to wring substantial savings out of its supply channels.

“The big thing is their supply chain can really be enhanced by this type of deal,” Mark Kalinowski, restaurant analyst for Salomon Smith Barney, said. “In traditional supply chains there is a lot of inefficiency, and if you migrate things to the Web, there's an opportunity to really squeeze those inefficiencies out.”

EMac Digital will have its own board of directors and will immediately begin its search for a chief executive officer and senior management team, the companies said.

The board will include McDonald's Greenberg and James Breyer, managing Partner of Accel Partners and a director of Accel-KKR. McDonald's and Accel-KKR have each made equity investments to capitalize eMac Digital.

“We believe this partnership is an ideal way to use online technologies to create additional value for the McDonald's System, one of the world's largest purchasers of agricultural products, by streamlining processes and reducing costs,” James Breyer of Accel said.

A spokesman for McDonald's would not disclose the size of its equity stake in eMac Digital and provided no timetable for when the business would be up and running.

Palo Alto, California-based Accel-KKR, formed by Accel Partners and private equity firm Kohlberg Kravis Roberts & Co., helps businesses integrate offline and online operations.

In March, McDonald's invested in online food takeout and delivery service company Food.com. At the time, McDonald's said it made the investment as a way to explore opportunities for its core hamburger business, as well as its non- hamburger brands like Donatos Pizza.

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