Mainland-backed Ng Fung Hong, sitting on a war chest of $1 billion, plans to buy a controlling stake in a state-owned mainland grape winery. 'We are in preliminary discussions with the winery. It will take some time for the deal to materialise,' a company spokesman said. The move continues the red chip's diversification from its livestock and fresh food distribution interests, which contribute most of its earnings. The stock closed yesterday at $8.55, up 40 cents. The spokesman said Ng Fung Hong's strategy was to acquire more than 51 per cent of takeover targets. He did not identify the winery, but hinted it was among China's top five. Reports in Hong Kong suggest it is Mingquan Winery in Henan province, China's third largest. He said the company was lured by the grape wine industry's potential growth in China and Hong Kong. 'The industry records an annual growth of more than 100 per cent every year in China. As the government encourages consumers to switch from strong alcoholic drinks to grape wine because of health concerns, it will hold a promising future,' he said. Salomon Brothers Asia Pacific's research vice-president An Lu said the proposed acquisition would broaden the company's product range, as it already distributed Chinese wines. Ng Fung Hong could capitalise on its existing distribution network, he said. The spokesman said Ng Fung Hong also was proceeding with the purchase of a deep-sea fishing project in West Africa.