Diageos relationship with Quanxing in China dates back to 2006

Diageo's relationship with Quanxing in China dates back to 2006

The head of Diageo has reiterated the company's preference to acquire a larger stake in its Chinese JV that controls the ShuiJingFang baijiu producer in the country.

Almost two years ago, Diageo secured a controlling stake in Sichuan Chengdu Quanxing Group Company when it was given approval to take its holding to 53%. Privately-held Quanxing Group is the biggest shareholder in ShuiJingFang, and gives Diageo a 21% indirect controlling stake in the publicly-listed baijiu firm.

In an interview with the UK's Sunday Telegraph yesterday (24 March), CEO Paul Walsh said that he is keen to secure a larger stake in Quanxing Group while also continuing the hunt for further purchases in the country. “Our strategy (in China) is twofold,” Walsh told the Sunday Telegraph. “First of all, to continue to establish our majority control on the business – aka get more equity.

“And, to look for other acquisitions. One thing that is sometimes not understood [is that] in buying ShuiJingFang, we also got approval to use that as a further acquisition vehicle in China.”

When contacted by just-drinks, a spokesperson for Diageo confirmed the company's hopes for Quanxing, although no details regarding timing nor comment on likelihood of success were available.

Following the increase of its stake in Quanxing, Diageo was obliged to launch a tender offer for the remaining shares in Shuijingfang. The offer, which closed last year, was priced at lowest price permissible, in order to maintain local interest in the firm's shareholding.

ShuiJingFang is China's fourth largest producer of super premium Baiju white spirit. In 2011, baiju accounted for 57% of China's GBP42bn alcoholic drinks market by value.