* China approves Diageo's increased stake in joint venture
* Diageo says not intention to take full control of
* Says has financial resources if required to take full
* Diageo shares close up 0.8 percent
(Adds further details and share price close)
By David Jones
LONDON, June 27 - British drinks group Diageo said
it did not intend to take full control of Sichuan Shuijingfang
, China's fourth largest white spirits group, after
winning approval to raise its stake in Shuijingfang's biggest
The maker of Johnnie Walker whisky and Smirnoff vodka said
it was keen to expand its presence in super premium Chinese
white spirits, one of the world's largest and fastest growing
spirits sectors and where Shuijingfang's business is focused.
Diageo said on Monday it had approval to raise its stake in
its joint venture Sichuan Chengdu Quanxing by 4 percent to 53
percent for 140 million yuan ($22 million), and this would
trigger an offer for Shuijingfang.
Quanxing has a stake of 39.7 percent in Shuijingfang and,
under Chinese rules, if Diageo has control of Quanxing it must
launch a mandatory tender offer for the whole of Shuijingfang,
which is listed as Sichuan Swellfun.
A Diageo spokesman said while it wanted to work with other
shareholders in Shuijingfang, it had the financial resources to
mount a full bid under the tender offer, which would be worth
6.3 billion yuan.
"It is not our intention to seek full ownership 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," the spokesman said.
The approval was one of a number of deals announced between
Britain and China and worth 1.4 billion pounds in total during a
visit by Chinese Premier Wen Jiabao to Britain.
The Diageo investment contrasts with Coca-Cola's
failed $2.4 billion cash bid for Huiyuan Juice Group back in
2009, which collapsed after China ruled that the proposed deal
would have been bad for industry competition.
The London-based group is now required to seek clearance to
launch its tender offer for Shuijingfang, which is expected to
take several weeks.
Diageo has priced its tender offer at the minimum required
-- 21.45 yuan per share compared with Friday's closing share
price of 21.22 yuan.
Diageo shares closed up 0.8 percent at 1,270 pence in a
slightly firmer London stock market.
Vermilion Partners acted as lead adviser to Diageo, while
UBS and CITIC Securities also advised on the transaction.
($1 = 6.475 Chinese renminbi)
(Reporting by David Jones; Editing by Jane Merriman and Dan