McDonald’s in $743.6 Million Tax-Free Split-Off of Chipotle

October 12, 2006

Cleary Gottlieb represented McDonald’s Corporation in an exchange of 16,539,967 shares of class B common stock of Chipotle Mexican Grill, Inc. held by McDonald’s, for 18,628,187 shares of McDonald’s common stock. Through this tax-free exchange offer, McDonald’s disposed of its remaining interest in Chipotle, which represented approximately 82.2% of the voting interest and 50.8% of the economic interest in Chipotle prior to the exchange offer. Morgan Stanley was the dealer manager for the exchange offer, which closed on October 12.

The exchange offer completed McDonald’s exit from Chipotle, which began with Chipotle’s $199 million IPO in January (which included a $66 million secondary offering by McDonald’s), and continued in May with a follow-on $275 million secondary offering. Cleary Gottlieb represented McDonald’s in all transactions, and also represented Chipotle in the IPO. The aggregate gross proceeds to McDonald’s from these three transactions (including the value of the McDonald’s shares tendered in the exchange offer) were approximately $1.1 billion.

A total of 262,183,800 shares of McDonald’s common stock were tendered in the exchange offer, with a final proration factor of 7.01043% applied to all tendered shares of McDonald’s common stock except the “odd-lot” shares to determine the number of shares that would be accepted. Under the terms of the exchange offer, for each $1.00 of McDonald’s common stock accepted in the exchange offer, the tendering shareholder will receive approximately $1.11 of Chipotle class B common stock, subject to a limit of 0.9157 shares of Chipotle class B common stock per share of McDonald’s common stock. The value of the two stocks were determined by reference to the average of the daily volume-weighted average prices, or daily VWAP, of McDonald’s common stock and Chipotle class A common stock on the New York Stock Exchange on the last two trading days of the exchange offer. This “fixed dollar value” pricing mechanism and the related web site were reviewed by the SEC and the exchange offer was the culmination of a successful request for no-action relief under Exchange Act Rules 13e-4(d)(1), 13e-4(e)(3), 13e-4(f)(1)(ii) and 14e-1(b).

As part of the exchange offer process, McDonald’s established an exchange offer web site to allow investors to review daily VWAP of McDonald’s common stock and Chipotle class A common stock on the New York Stock Exchange and other relevant information on a daily basis during the first 18 trading days and on a half-hour basis during the last two trading days of the exchange offer.

McDonald’s is the leading global foodservice retailer with more than 30,000 local restaurants in more than 100 countries. Chipotle, which operates in the fast-casual segment of the restaurant industry (the industry’s fastest-growing segment), opened its first store in 1993 and operates more than 500 stores today. Chipotle offers a simple menu of burritos, tacos, and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere.