Diageo Gains Regulatory Approval for Majority Shareholding in Joint Venture Chinese White Spirits Company
Separately, subject to the right opportunities becoming available, Diageo has agreed to facilitate financing for Quanxing of up to approximately RMB 2 billion (£193 million) for the development of its main business.
6/28/2011 --- Chinese regulators have approved Diageo’s acquisition of an additional 4% stake (the “4% transfer”) in Sichuan Chengdu Quanxing Group Company Ltd. ("Quanxing") from Chengdu Yingsheng Investment Holding Co., Ltd (“Yingsheng”). Steps are now being taken to complete the 4% transfer for a consideration of about RMB 140 million (£13 million). Once completed, this 4% transfer will bring Diageo’s holding in Quanxing to 53%. Quanxing is currently the largest shareholder of Sichuan Shuijingfang Co., Ltd. (“ShuiJingFang”) which is listed on the Shanghai Stock Exchange.
Diageo is now seeking approval from the China Securities Regulatory Commission (“CSRC”) to launch the required mandatory tender offer (“MTO”) for the outstanding shares of ShuiJingFang, in which Quanxing holds a 39.7% stake. Diageo expects to receive the CSRC approval in due course.
Once the CSRC approval has been received, Diageo will immediately launch the MTO for the outstanding shares of ShuiJingFang in accordance with Chinese takeover regulations. The MTO price of RMB 21.45 per share has been set at the minimum price permitted by Chinese takeover regulations. Were all other ShuiJingFang shareholders to accept the MTO, the maximum amount payable would be approximately RMB 6.3 billion (£609 million). As required by Chinese law, 20% of the maximum amount payable has already been deposited with the China Securities Depository Clearing Corporation. Diageo will fund the MTO through its diversified financing sources and strong global cash generation. Further announcements at the launch of the MTO and of the results of the MTO will be made in due course.
Separately, subject to the right opportunities becoming available, Diageo has agreed to facilitate financing for Quanxing of up to approximately RMB 2 billion (£193 million) for the development of its main business.
Paul Walsh, Chief Executive of Diageo, commented: ‘I am delighted that Diageo's application to increase its investment in Quanxing has been approved by the Chinese authorities. We look forward to working with our Chinese partners to further develop the ShuiJingFang brand both domestically and overseas.
‘We are privileged to have the unique opportunity to participate at scale in super premium Chinese white spirits, one of the largest, fastest growing spirits segments in the world. I am appreciative of the vote of confidence Diageo has received from the Chinese authorities and the tremendous support we have had from our own government as we seek opportunities for growth in our business.’
A spokesman for Diageo’s Chinese business partner, Yingsheng, commented: ‘I am very pleased that Diageo has received Chinese government approval for its increased investment in Quanxing. We look forward to working even more closely with our partners at Diageo to build a world–class Chinese ‘bai jiu’ business. I am sure that with Diageo’s support, ShuiJingFang will become the world’s leading ‘bai jiu’ brand in international markets. I am grateful for the strong support we have had from the Chinese central authorities and the Sichuan provincial government.’
Gilbert Ghostine, President of Diageo Asia Pacific said: ‘We are thrilled with the opportunity we have been given to increase our investment in ShuijingFang and to deepen our partnership with the Quanxing Group. I am confident that we have chosen the best possible partner in super-premium Chinese white spirits and look forward to working with them as we grow our position in this exciting category.’
Vermilion Partners acted as lead adviser to Diageo. UBS Investment Bank and CITIC Securities also advised on the transaction.
