China's Mengniu set to purchase second big Australian dairy group before end of 2019
2020-03-20 11:29 Friday
China Mengniu Dairy, which is part government-owned by the Chinese government, has announced plans to purchase Lion Dairy & Drinks, the owner of some of Australia's most famous milk brands from Japan's Kirin Holdings.
The deal is said to be worth A.$ 600m (U.S.$ 555m) and would advance Kirin's strategy of selling off its underperforming assets that are situated outside of Japan
The purchase would be the second buyout of an Australian dairy firm in two months by Mengniu. Just 10 days prior, China Mengniu received approval from the Australian government to buy infant formula-maker Bellamy's for A$1.43 billion (U.S.$ 969m).
The sale will give the Chinese government-backed company control of many Australian household brand names such as Dairy Farmers, Pura and Moove flavoured milk. It will also earn them a wide range of associated F&B brands such as Berri, The Juice Brothers, Vitasoy soy milk and Dairy M.
Lion Dairy & Drinks is involved in partnerships with some 85 fruit growers and 280 dairy farmers. It also makes up about 20% of the southern hemisphere nation's entire milk market.
The deal marks the takeover of one of the country's biggest dairy groups following a twelve-month wait on the market for the owner. The decision to sell comes as Kirin also attempts to shift to becoming a more alcohol-centric firm.
Kirin announced it would focus on expanding its Australian alcohol position following the dairy sale "by strengthening the allocation of resources to high-margin categories in alcoholic beverages and premium non-alcoholic beverages".
China Mengniu said in a statement that Lion Dairy's "access to the significant volume of highly-regarded Australian milk pool, its large scale of thirteen manufacturing facilities across the country and the extensive cold chain distribution network... make (it) a strong comprehensive vertically integrated dairy player."
Owning both Australian firms will give China Mengniu "a stronger foundation to excel in the APAC markets", the Chinese dairy conglomerate added.
The deal comes during a difficult period for Australia's relationship with its largest trading partner, just 4 years into a free-trade agreement. The country's government has sought to stem suspected political influence from China, while Beijing has accused Australia of acting in the manner of a "condescending master" with respect to the area.
This has resulted in some China-to-Australia buyout attempts being vetoed on the grounds of national security, including attempted purchases of infrastructure and energy assets.
Australian Treasurer Josh Frydenberg, who oversees the country's Foreign Investment Review Board, told reporters the government did not comment on specific foreign investment matters.
Tokyo-listed Kirin, which picked up Lion Dairy in 2009 as part of a broader takeover of Australian alcoholic drink maker Lion Nathan, took an impairment loss of around 57.1 billion yen (U.S.$ 522m) from Lion earlier this year and had been considering a sale as part of a review of its business portfolio.
Meanwhile, Stuart Irvine, Lion CEO, said: "We believe Mengniu Dairy, a specialty dairy player, is an ideal owner to take Dairy & Drinks forward, given it has a track record of investing in the Australian dairy industry, together with its global reach and deep capabilities."