Diageo Highlands Holding B.V. is the producer of Guinness, Baileys and Smirnoff vodka.

Diageo gets an OK for China spirits deal

外资控股水井坊终获批

UK-based liquor giant Diageo Highlands Holding B.V. has received approval from Chinese regulators to take control of a Sichuan grain-spirit maker, 16 months after the deal was first announced, China Securities Journal reported Tuesday.

China's Ministry of Commerce has approved Diageo to acquire an additional 4 percent stake in Sichuan Chengdu Quanxing Group for 140 million yuan (13 million pounds), bringing its holding to 53 percent, Diageo said Monday.

The go-ahead came as U.K. Prime Minister David Cameron met with Chinese Premier Wen Jiabao in London to discuss business cooperation between the two nations.

The deal will give Diageo indirect control of Sichuan Shuijingfang Co., a Shanghai-listed producer of baijiu, a popular Chinese liquor considered a national heritage brand off limits to Western investors.

Under Chinese laws, Diageo will need to launch a mandatory tender offer for outstanding shares of Shuijingfang.

Diageo has priced its offer at the minimum required, 21.45 yuan per share, just above Friday's closing share price of 21.22 yuan.

If the remaining 60% of Shuijingfang shareholders approve the offer, Diageo will pay up to 6.3 billion yuan (about 594 million pounds) to secure the rest of the firm. Shareholders, however, are not expected to get behind the bid at that price.

"It is not our intention to seek full control of Shuijingfang as we see benefits in working with Chinese shareholders, but we do have the resources in place to fund the bid if needed," said a Diageo spokesperson.