Diageo wins approval for marathon Chinese spirits deal

By Guy Montague-Jones

- Last updated on GMT

Related tags Diageo

Diageo has gained approval from the Chinese authorities to take control of a local spirits manufacturer after some 16 months of waiting.

The deal increases the Diageo stake in Quanxing 4 percentage points to 53 per cent at a cost of £13m (€14.5m) tipping control into the hands of the British spirits giant.

By increasing its ownership of Quanxing, Diageo establishes indirect control of ShuiJingFang – a major producer of the Chinese spirit Baijiu.

Under the complex financial deal, the next step is a mandatory takeover bid for the remaining shares in ShuiJingFang. A full bid would be worth about £609m (€681m).

ShuiJingFang is a prominent maker of Baijiu – a ‘white’ spirit with a 30 per cent share of the Chinese spirit market.

Home and abroad

Diageo sees the investment as an opportunity to open up a major growth market. Paul Walsh, CEO of Diageo, described it as a “unique opportunity to participate at scale in super premium Chinese white spirits, one of the largest, fastest growing spirits segments in the world.”

The UK-based company does not just plan to grow ShuiJingFang in China. Walsh said he looked forward to working with Diageo’s partners to develop the brand both in China and overseas.

A spokesperson for Diageo’s Chinese business partner, Yingsheng added: “I am sure that with Diageo’s support, ShuiJingFang will become the world’s leading baijiu brand in international markets.”

News of the regulatory approval for the deal comes as UK Prime Minister David Cameron met Chinese Premier Wen Jiabao in London.

Walsh thanked the UK government for its support. “I am appreciative of the… tremendous support we have had from our own government as we seek opportunities for growth of our business.”

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