Britain's Diageo Plc has offered to buy Sichuan Swellfun Co for up to 624 million pounds (US$932 million) as it aims to tap growing liquor sales in China.In a two-step transaction, Diageo, a global alcoholic drinks group that makes Smirnoff vodka and Johnnie Walker whisky, agreed to raise its stake in Swellfun's parent, Chengdu Quanxing Group, to 53 percent from 49 percent for 14 million pounds, pending Chinese regulatory approval.

The higher stake will result in Diageo becoming the controlling shareholder in Shanghai-listed Swellfun and require the British distiller to make an offer for the remaining 60.29 percent it doesn't own under Chinese company laws.

China bars foreign control of certain renowned Chinese white spirit, or baijiu, a drink produced from sorghum. For example, one of Quanxing's products, Quanxing Daqu, belongs in that category. Quanxing said it is selling 55 percent of Sichuan Quanxing Distillery Co, which makes Quanxing Daqu, to a domestic company.

China Merchants Securities analyst Zhu Weihua said the stake sale could help Quanxing bypass the policy barrier and won't cause a major impact on earnings because Quanxing Distillery only accounts for a small part of Quanxing Group's profits.

The offer could cost a maximum of 610 million pounds as Diageo agreed to pay 21.45 yuan (US$3.14) each for the remaining shares.Swellfun surged by the maximum allowable 10 percent to 23.74 yuan yesterday on the Shanghai Stock Exchange amid a falling market as its shares resumed trading.

Diageo, which competes with French spirits group Pernod Ricard in China, is eying the rising middle class in emerging markets as drinkers in the United States and Europe are consuming less premium liquor amid an economic downturn.But Zhu questioned if a foreign firm can succeed, given limited knowledge of the domestic white spirit markets.