Diageo leads raft of China trade deals
DIAGEO is to become the first spirits firm to take control of a Chinese-listed rival, after a £13m deal was approved yesterday.
The deal, which was announced during Chinese Premier Wen Jiabao’s visit to Britain, was given the green light by regulators in a sign that the emerging superpower is becoming more open to foreign investment.
Diageo will take an extra four per cent stake in Quanxing Group, a Chinese white spirits group based in Sichuan Province, taking its holding to 53 per cent and giving it control. Diageo will now seek approval to launch a mandatory tender offer for the firm.
Yesterday’s agreement comes after months of intense lobbying by the British government, and is one of just a few examples of a foreign corporation taking over a Chinese-listed firm.
The Diageo deal capped a flurry of similar agreements, including:
• An agreement between BG Group and Bank of China to access a new credit facility of up to $1.5bn.
• A deal that will let Unilever ramp up its manufacturing capacity in China, a market where it already gets $2bn of sales.
• A deal to supply 800 breeding pigs to China, worth more than £1m, and to reopen the Chinese market for UK poultry exports, worth £10m to British farmers.
MEET THE ADVISERS
ED RADCLIFFE VERMILION
VERMILION Partners was the top adviser on Diageo’s latest Chinese venture above UBS and CITIC Securities, with Vermilion’s Edward Radcliffe taking a lead role in the deal.
Radcliffe has now worked on two of Diageo’s three stake increases in Quanxing, the group company that owns luxury drink-maker Shuijingfang.
Vermilion itself, chaired and co-founded by Peter Batey, is an advisory firm specialising in China that has helped both RBS and Barclays Capital to build their presence in the country.
Radcliffe’s latest work with Diageo marks the first time a foreign company has been able to gain majority control of a player in the Chinese luxury drinks market.
Another FTSE 100 player that has called on Radcliffe’s Chinese contacts book is Smiths Group, for three acquisitions since 2008.