Could Diageo buy up more of Shuijingfang?

Could Diageo buy up more of Shuijingfang?

Diageo has not ruled out any future moves to up its stake in Shuijingfang, after today's green light to become the baijiu producer's largest shareholder.

Earlier today (23 July), the UK-headquartered group announced that it will take full control of Sichuan Chengdu Shuijingfang Group Co (SJF Holdco), and thereby upping its stake in Shuijingfang from 21.05% to 39.71%. It comes after China's authorities gave the go-ahead for the move. 

In the statement announcing the transaction, Diageo pledged to “work with the senior Chinese management to build Shuijingfang into the leading international baijiu brand”.

Meanwhile, last year, Diageo triggered a mandatory tender offer for Shuijingfang after it raised its holding in SJF Holdco: the company priced the MTO at the lowest possible amount allowed by law, in order to keep the domestic interest in Shuijingfang at a high level.

However, when asked today if Diageo would look to increase its stake in Shuijingfang from 39.7%, a spokesperson for the company told just-drinks: “We may decide to increase our direct stake, subject to regulatory requirements and market conditions.”

Should Diageo look to acquire more shares in Shanghai-listed Shuijingfang, as a foreign company it would need to apply for 'Strategic Investor Status' with the Chinese authorities. Such an application can only be made if the stake purchase amounts to 10% or more of the company.