Diageo eyes tilt at ShuiJingFang

Diageo eyes tilt at ShuiJingFang

Diageo has been cleared for a tilt at one of China's leading producers of super premium white spirit, ShuiJingFang. Here, we summarise the mechanics of the deal and look at China's white spirits market.

  • First, the deal itself. At present Diageo has only received approval to increase its stake in Sichuan Chengdu Quanxing Group Company by 4% to 53%. Quanxing Group is the biggest shareholder in ShuiJingFang, also known as 'Listco', with a 39.7% share. Chinese takeover law means that Diageo must launch an offer to acquire all outstanding shares in ShuiJingFang, following its acquisition of a controlling stake in Quanxing Group. Diageo will price its offer at RMB21.45 (US$3.30) per share.
  • ShuiJingFang is China's fourth largest producer of super premium white spirit Baiju. Local white spirits account for around 57% of China's alcoholic drinks market by value, or around GBP21bn (US$33.5bn).
  • International spirits account for just 2% of China's alcohol market by value, at around GBP1bn.
  • Diageo predicts that the Chinese white spirits sector will grow by 10% in value terms per year up to 2015.
  • By 2015, Diageo estimates that alcoholic drinks sales per year in Asia-Pacific will total GBP106bn, more than that of any other region. According to the group, 50m consumers attain legal drinking age every year in Asia-Pacific, which includes Australia in Diageo's definition of the region.