Diageo’s bid to take control of Shuijingfang could set an important precedent on China’s drinks market.
The UK Government has signalled that it will throw some weight behind Diageo’s efforts to take control of Shuijingfang, one of China’s leading white spirits producers. There is even speculation that a deal could be announced this week.
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If Diageo wins the day, analysts believe that the deal could triple the value of its operations in China overnight. However, the prospective deal also has more far-reaching implications and, if approved by country’s tough Ministry of Commerce, could be a landmark case in China’s attitude to foreign takeovers.
UK prime minister David Cameron and business secretary Vince Cable are meeting their Chinese Government counterparts in China this week to discuss, among other things, bilateral trade.
Diageo has been heartened by suggestions that its offer for Shuijingfang has been made one measure of the trip’s success. “We are obviously grateful that the Government intends to make representations in support of our position,” a Diageo spokesperson said in a statement today (8 November).
Yet, the Johnnie Walker distiller is clearly treading a cautious path. “The regulatory decision on this acquisition, and the timing of that decision, are completely a matter for the Chinese authorities – specifically the Ministry of Commerce – and Diageo respects that process,” the group was quick to add.
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By GlobalDataThe Coca-Cola Co burnt its fingers in China last year when the Ministry of Commerce rejected its US$2.4bn takeover of the country’s leading juice maker, Huiyuan Juice Group. The move led some observers to accuse China of double standards by blocking foreign takeovers on its soil at the same time as encouraging Chinese firms to pursue takeovers overseas.
