LONDON -- Following recent news that it has not been troubled by stricter regulations in China, Diageo (DGE 0.72%) (DEO 0.96%) is believed to have entered initial talks to increase its holding in Quanxing, the holding company that owns a 39.7% stake in popular baijiu brand ShuiJingFang.
Diageo already owns a 53% interest in Quanxing -- and, indirectly, 21% in ShuiJingFang -- after previously upping its stake from 49% for 13 million pounds in 2011, but before any such offer is lodged, as reported by The Sunday Telegraph it is understood that the distiller has approached Sichuan provincial department of the Ministry of Commerce to register its interest and seek approval.
The move -- with Diageo mooted to be looking for up to a 90% controlling stake -- would go some way in consolidating its position in the premium end of the baijiu drinks market, whose sales are thought to make up around half of China's annual 45 billion-to-50 billion pound spend on alcohol.
I purchased shares on the strength of its diverse portfolio and its exposure to emerging markets, so, as a shareholder, I'm encouraged by the noises coming from the East. At 2,037 pence, Diageo's shares have increased more than 2.5-fold in the past five years from a low of 733 pence in 2009 and are currently on a forecast yield of around 2.4%.
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