Regulatory Nod Leaves Diageo Better Poised To Leverage Off Growing Baijiu Demand

After more than 15 months of wrangling with the Chinese authorities, UK alcohol group Diageo has finally received the green light from China's Ministry of Commerce to acquire an extra 4% of Sichuan Chengdu Quanxing Group Company and increase its existing stake to 53%. According to local regulatory requirements, Diageo will then have to launch a mandatory tender offer for local white spirits producer Sichuan Swellfun (subsidiary of Sichuan Quanxing Group Company and the producer of spirits brand Shui Jing Fang). Although Diageo's acquisition of Quanxing Group is valued at just GBP13mn (US$20.8mn), the significance of the deal lies with China's willingness to let its iconic local brands fall into foreign hands. Diageo's takeover of Sichuan Swellfun will make it one of the very first foreign companies to successfully acquire a listed Chinese company.

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