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Diageo is poised to bet nearly $1 billion on the Chinese spirits market. The drinks giant is moving to acquire a controlling stake in the holding company that owns Sichuan Shui Jing Fang Co (SJF), one of China’s most storied spirits brands. Diageo has agreed to pay £14 million ($21m) to increase its stake in Sichuan Chengdu Quanxing Group (CQG)—the holding company that owns roughly 40% of SJF—from 49% to 53%.
Under Chinese law, once Diageo obtains majority control of CQG, it will be required to make a tender offer for the remaining 60% of the SJF, which is traded on the Shanghai Stock Exchange. The offer for the remaining 60% would amount to a maximum of £610 million ($915m), according to Diageo.
Diageo first acquired a 43% stake in CQG in 2007, raising it to 49% the following year. With annual sales of nearly $200 million—the vast majority derived from its namesake brand—SJF is one of China’s leading producers of baijiu, the local white spirit that dominates China’s spirits market. Along with becoming a major player in the baijiu sector via its CQG stake, Diageo has partnered with SJF on Shanghai White, a vodka brand that rolled out last year. Diageo is also among the leaders in China’s imported spirits market, through Moët Hennessy Diageo (its joint venture with LVMH), which markets top sellers like Johnnie Walker Black and Hennessy.
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