China Mengniu Dairy to buy 2nd Aussie dairy firm

SYDNEY • China Mengniu Dairy, part-owned by the Chinese government, plans to buy the owner of some of Australia's best-known milk brands from Japan's Kirin Holdings for A$600 million (S$555 million).

This would be its second Australian dairy buyout in two months.

The sale of Lion Dairy & Drinks would advance Kirin's strategy of offloading underperforming assets outside Japan, while giving the Chinese government part-owned company control of Australian household brands such as Pura, Dairy Farmers and Moove flavoured milk.

China Mengniu received Australian government approval to buy infant formula-maker Bellamy's for A$1.43 billion just 10 days earlier.

"Its access to the significant volume of highly regarded Australian milk pool, its large scale of 13 manufacturing facilities across Australia and the extensive cold chain distribution network... make (Lion Dairy) a strong comprehensive vertically integrated dairy player," China Mengniu said yesterday.

Owning both Australian companies would give China Mengniu "a stronger foundation to excel in the Asia-Pacific markets", the Chinese company added.

The deal comes at a strained period for Australia's relationship with its biggest trading partner just four years into a free trade agreement. The Australian government has sought to curb suspected political influence from Beijing, while China has accused Australia of acting like a "condescending master" with respect to the region.

That has resulted in some China-to-Australia buyout attempts being blocked on the grounds of national security, including attempted purchases of energy and infrastructure assets.

Chinese companies have meanwhile sought to buy Australian health and dairy companies to offset local supply shortages and benefit from demand for foreign produce, amid lingering concerns about a contamination scare a decade ago.

Australian Treasurer Josh Frydenberg, who oversees the country's Foreign Investment Review Board, said 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, has been looking to unload underperforming overseas assets and expand instead in health and cosmetics.

In 2017, it sold its money-losing Brazilian beer business, bought for US$3.9 billion in 2011, to Heineken for US$1.09 billion (S$1.5 billion).

Kirin took an impairment loss of around 57.1 billion yen (S$716 million) from Lion in April and had been considering a sale as part of a review of its business portfolio, which spans alcoholic and non-alcoholic beverages, food and drugs at home and overseas.

The Japanese company said it would focus on growing its Australian alcohol business following the dairy sale "by strengthening the allocation of resources to high-margin categories in alcohol beverages and premium non-alcohol beverages".

The company would also target a new global growth market of craft beer.

REUTERS

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A version of this article appeared in the print edition of The Straits Times on November 26, 2019, with the headline China Mengniu Dairy to buy 2nd Aussie dairy firm. Subscribe