China Tontine Wines Group Limited (CTWGL), a China-based sweet grape wine producer, is to buy around 60% registered capital of Yantai Baiyanghe Winery for CNY225m ($35.68m) through its wholly owned subsidiary Topping Future.

The company has signed a formal agreement to implement the acquisition and capital injection transactions, which is expected to benefit both the companies for their business development.

Located in Qixia City, Yantai Baiyanghe produces and sells over 80 types of wine products including grape wine and brandy.

The company has generated profits of over CNY30m ($4.75m) and CNY38m ($6.02m) in 2010 and 2011 respectively and in the first half of 2012 has generated profits of around CNY19m ($3.01m).

The transaction will help CTWGL expand its grape wine portfolio, develop imported wine business, wine making technology, product quality, production capacity, achieve economies of scale and effectively lower production costs through integration of the production lines and raw materials procurement of the two enterprises.

CTWGL also plans to reorganise the distributorship of the two enterprises and integrate the distribution channels so as to expand its distribution network.

CTWGL chairman Wang Guangyuan said they intend to eventually integrate the products of the two enterprises, with Tontine Wines focusing on the sweet wine, estate wine and cellar wine products, and Yantai Baiyanghe focusing on dry wine and imported wine as its core business.

"This move can complement each other in product portfolio, thereby better satisfying customers’ demand and catering for a wider range of customers," Guangyuan added.

Upon completion of the transaction, Yantai Baiyanghe will become a subsidiary of CTWGL.