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Diageo To Boost Shuijingfang Stake In $358M Deal

July 23, 2013

Diageo has received approval from Chinese authorities to acquire the remaining 47% stake in the holding company of upscale baijiu-maker Shuijingfang (SJF) that it didn’t already own. Currently a joint venture with local partners, SJF Holdco will be a wholly-owned Diageo enterprise on completion of the $358 million deal. As a result of the transaction, Diageo’s indirect interest in Shanghai-listed Sichuan Shuijingfang Co. Ltd will rise from 21% to just under 40%.

“This is a milestone in the journey we began with our partners six years ago,” said Diageo Asia Pacific president Gilbert Ghostine. “As the controlling shareholder in Shuijingfang, Diageo will continue to work with the senior Chinese management to build Shuijingfang into the leading international baijiu brand.”

Ghostine added that, despite a downturn in China’s baijiu market owing to a crackdown on government entertaining over the past year, he has “every confidence in the long-term future of the baijiu category in China.” Key baijiu brands like Wuliangye and Moutai have seen sales plummet this year as a result of the austerity directive issued by senior Chinese officials, which began about a year ago and has intensified under the new regime. Local sources tell SND that they expect government entertaining—the most valuable segment of the baijiu market—to eventually rebound, although perhaps not to its former level. Baijiu accounts for more than 460 million cases, or about 98%, of China’s spirits market.

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