Diageo to launch a MTO for the outstanding shares in Sichuan Shuijingfang Co., Ltd

Posted: 20 March 2012 | Diageo | No comments yet

Diageo to launch a MTO for the outstanding shares of ShuiJingFang…


The China Securities Regulatory Commission (“CSRC”) has issued its approval for Diageo to launch a mandatory tender offer (“MTO”) for the outstanding shares of Sichuan Shuijingfang Co., Ltd. (“ShuiJingFang”), as required by Chinese takeover regulations.

On 23rd June 2011 Diageo gained regulatory approval to acquire an additional 4% stake in Sichuan Chengdu Quanxing Group Company Ltd. (“Quanxing”) from Chengdu Yingsheng Investment Holding Co., Ltd (“Yingsheng”). Registration of the transfer of the 4% was completed on 4th 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.

Following the completion of certain procedures, Diageo expects the MTO to be launched soon, and it is expected to close 30 days after the launch, with the results to be announced the following day. The MTO price is set at RMB 21.45, which is the minimum price permitted by Chinese takeover regulations.

The offer price of RMB 21.45 per share is 17.16% percent below the closing price of the shares on the Shanghai Stock Exchange on 19th March 2012. Diageo does not intend to raise the offer price.

Were all other ShuiJingFang shareholders to accept the MTO, the maximum amount payable would be approximately RMB 6.3 billion (GBP630m). As required by Chinese law, 20% of the maximum amount payable has already been deposited with the China Securities Depository Clearing Corporation. Diageo will fund the MTO through its diversified financial resources.

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