Drinks giant Diageo has been given the go-ahead from Chinese authorities to buy out a joint venture in the fast-growing economy for about ?233 million.
The maker of Johnnie Walker whisky and Smirnoff vodka previously owned 53 per cent of SJF Holdco, but will now spend about ?233m to acquire the remaining 47 per cent and convert the business into a wholly-owned enterprise.
The deal will see Diageo?s stake in Shanghai-listed Chinese white spirits ? or ?bai jiu? ? maker Sichuan Shuijingfang rise from 210.5 per cent to 39.71 per cent.
Gilbert Ghostine, president of Diageo Asia Pacific, said: ?This is a milestone in the journey we began with our partners six years ago.
?As the controlling shareholder in Shuijingfang, Diageo will continue to work with the senior Chinese management to build Shuijingfang into the leading international bai jiu brand. I have every confidence in the long-term future of the bai jiu category in China.?
Shore Capital analyst Phil Carroll said: ?This represents positive news in our view in relation to Diageo?s strategy of increasing its emerging market exposure albeit the timing from a Chinese market perspective is at a point where the gifting restrictions have put pressure on ultra premium spirit sales as well as a general slowdown in the Chinese economy relative to recent years.
?That said, it has taken Diageo six years to get to this point in the transaction and it is looking at developing assets such as SJF on a medium to long term basis. Given the clear high barriers to entry for such assets, we believe this deal should position Diageo well for the future.?
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