Diageo to acquire controlling stake in Shuijingfang

Diageo (DEO.NYSE, DGE.LSE), an alcoholic beverages company based in the UK, will pay as much as US$1.3 billion to acquire control of Shuijingfang, a famous Chinese baijiu brand, the Financial Times reported. The deal marks one of the first foreign acquisitions of an important Chinese brand, though Western governments have long pressured Beijing to be more open to foreign investment. Diageo’s purchase of a majority stake in Sichuan Chengdu Quanxing Group, the largest shareholder in Sichuan Shuijingfang (Sichuan Swellfun; 600779.SH), will give the UK company a foothold in China’s US$40 billion baijiu market. “The transaction gives the lie to the broadly held view that the Chinese M&A market is closed to foreigners,” said Edward Radcliffe, partner at Vermilion, the lead adviser on the transaction. “If you abide by the rules, invest in long-term relationships and show commitment to the industries, you can get things done.”