Diageo eyes 43pc stake in Chinese white spirit maker
Diageo, the world's largest liquor company, plans to buy 43 per cent of a Chinese white spirit maker to enlarge its mainland production capacity and sales opportunities.
The British-based company will buy the stake through its subsidiary, Diageo Highlands Holding, according to a statement.
The purchase will make Diageo the second-largest shareholder of Sichuan Chengdu Quanxing, the parent firm of A-share listed Sichuan Swellfun. No financial details were given in the statement from Swellfun yesterday.
Based on Quanxing's net asset of 609 million yuan in 2002, the deal would be worth more than 262 million yuan, according to Swellfun's annual report last year. The deal is subject to approval from the provincial and central governments.
Swellfun is Sichuan's third-largest white spirit maker after Maotai and Wuliangye, two of China's most famous liquor brands.
'The acquisition will help Diageo more on the sales side rather than the manufacturing side,' said an analyst in Shanghai.
She said foreign firms would find it harder to access the white liquor market compared with the wine market because of the complicated technology in making white liquor.
Swellfun's net profit rose 28 per cent last year to 58 million yuan, as its profit margin for high-end products that contributed 93 per cent of revenue surged 82 per cent.
Diageo, listed in London and New York, covers 34 per cent of the whisky market.
Swellfun's shares fell 4 per cent to 12.60 yuan yesterday. They have tripled this year on rumours of the acquisition.
