The British-based company that makes Gordon’s Gin, Baileys Irish Cream and Smirnoff vodka offered CNY¥62 ($9.50) for each share of the company.
Diageo offered close to a 25% premium to Sichuan’s closing price of CNY¥49.6 ($5.70) on Monday.
Diageo also said that the proposal doesn’t constitute an offer and doesn’t create an obligation to the make an offer. It added that the proposal is under discussion and that there’s no certainty that another offer will be made.
The FTSE 100-listed firm currently holds a 39.71% stake in the Chinese baijiu maker but hopes to raise this to up to 60%.
The Shanghai-listed firm makes alcoholic products like baijiu as well as wines and liquors and said that it would not be de-listed if the deal is accepted.
In its half-year financial results, Diageo said that its net sales rose by 1.7% to reach £6.53bn ($8.64).
China only represents only a small proportion of Diageo’s international business but in its half-year figures, the spirits company posted a net sales increase of 32% in the region.