Diageo wins approval for marathon Chinese spirits deal

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 ¨C 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 ¨C 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.¡±