Diageo Strengthens Grip on Chinese Liquor Maker Shuijingfang

Diageo Plc (DGE), the world’s largest liquor company, consolidated control over Sichuan Shuijingfang (600779) Co., a maker of the popular Chinese spirit baijiu, as it seeks to expand in the country.

Diageo got approval from Chinese authorities to buy the remaining 47 percent of Sichuan Chengdu Shuijingfang Group Company Ltd. from its partners, it said today in a statement. The acquisition of the stake in the related joint venture, at a cost of about 233 million pounds ($358 million), will give Diageo full indirect control over 39.7 percent of Shuijingfang, the listed maker of baijiu.

The purchase is “a milestone in the journey we began with our partners six years ago,” Gilbert Ghostine, president of Diageo Asia Pacific, said in the statement.

Diageo, which competes with international companies including Pernod Ricard SA (RI) in China, is seeking to expand in the country’s local spirits category as booming economic growth increases alcohol consumption. Baijiu, a clear spirit usually made from sorghum or rice, is popular in China, where only about 2 percent of the volume of spirits consumed are foreign-made liquors like whisky or cognac.

Shuijingfang shares rose 3.1 percent at the close in Shanghai. Diageo’s shares were little changed at 2,039.5 pence at 9:51 a.m. in London.

Vermilion Partners acted as transaction adviser to Diageo.

To contact the reporters on this story: Paul Jarvis in London at pjarvis@bloomberg.net; Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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