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Diageo has gained regulatory approval to launch a Mandatory Tender Offer (MTO) for the outstanding shares in Chinese white spirits company Sichuan Shuijingfang Co Ltd.
Shanghai Stock Exchange-listed ShuiJingFang is one of the largest super-premium Chinese white spirits brands by volume in China.
Diageo has been distributing the ShuiJingFang portfolio across southeast Asia, Korea, Australia and the US since 2007.
The China Securities Regulatory Commission has issued its approval for the MTO, as required by Chinese takeover regulations.
On 23 June 2011 Diageo gained regulatory approval to acquire an additional 4% stake in Sichuan Chengdu Quanxing Group Company Ltd from Chengdu Yingsheng Investment Holding Co Ltd. The transaction was completed on 4 July 2011.
Diageo currently holds 53% of Quanxing. Quanxing itself holds a 39.7% stake and is the largest shareholder in ShuiJingFang, which is listed on the Shanghai Stock Exchange. The change of control of Quanxing requires Diageo to make an MTO for the remaining 60.3% outstanding shares of ShuiJingFang.
On 20 March 2012, Diageo said it expected the MTO to be launched soon, and it is expected to close 30 days after the launch. The MTO price is set at RMB21.45, the minimum price permitted by Chinese takeover regulations.
The offer price of RMB21.45 per share is 17.16% below the closing price of the shares on the Shanghai Stock Exchange on 19 March 2012. Diageo said it did not intend to raise the offer price.
Were all other ShuiJingFang shareholders to accept the MTO, the maximum amount payable would be about RMB6.3 billion. As required by Chinese law, 20% of the maximum amount payable has been deposited with the China Securities Depository Clearing Corporation. Diageo said it would fund the MTO through its diversified financial resources.
Diageo made its first 43% investment in Quanxing in February 2007 and increased its shareholding to 49% in July 2008. The firm then boosted its shareholding to 53% in July 2011.
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