Diageo to acquire controlling stake in Chinese liquor maker ShuiJingFang

Diageo Plc, the world's biggest spirits maker, plans to acquire a controlling stake in China's best-known liquor maker ShuiJingFang, in a £622-million ($1billion) deal making it one of the first big acquisitions by a foreign company of a Chinese listed company.

In the offer, first made in March 2010, which received Chinese regulatory approval just prior to Chinese Premier Wen Jiabao's visit to the UK this week, Diageo will acquire an additional 4\-per cent stake in its Chinese joint venture Sichuan Chengdu Quanxing Group (Quanxing) for £13 million ($22 million), taking its holding to 53 per cent.

The approval is in sharp contrast to the rejection of a proposed $2.4-billion bid by CocaCola for Huiyuan Juice, China's leading fruit juice maker, citing anti-monopoly laws. (See: China trips Coke on Huiyuan Juice acquisition)

Chengdu-based Quanxing holds a 39.7-per cent stake in ShuiJingFang, and under Chinese rules, if Diageo holds a majority stake in Quanxing it must launch a mandatory tender offer for the whole of ShuiJingFang, which is listed on the Shanghai Stock Exchange under the English name Swellfun.

Diageo, the maker of Guinness and Johnnie Walker, is now seeking approval from the China Securities Regulatory Commission (CSRC) to launch the required mandatory tender offer for the outstanding shares of ShuiJingFang, and the London-based spirits maker expects to receive the CSRC approval in due course.

Once Diageo receives the CSRC approval, it said that it will launch a mandatory tender offer for the whole of Shuijingfang at RMB 21.45 per share, the minimum price permitted by Chinese takeover regulations.