$600m Lion-China Mengniu dairy deal called off after food security knockback

Lion and China Mengniu have called off their proposed $600m dairy deal in the face of opposition from Treasurer Josh Frydenberg.

Brands including Yoplait will not move to Chinese ownership following the collapse of the sale of the Lion dairy to China’s Mengniu.

Lion and China Mengniu have called off their proposed $600m dairy deal in the face of opposition from Treasurer Josh Frydenberg

FIRB had approved the deal at an official level, after the ACCC cleared the transaction in February, but the Treasurer has now knocked it back on food security grounds.

The dairy group’s assets include Yoplait yoghurt, Big M flavoured milk, Berri fruit juices and the second largest cold food distribution chain behind Coca Cola Amatil.

Mengniu, which is 25 per cent owned by the Chinese Government, has in past years been cleared to buy baby food company Bellamys and control of Gippsland Dairy’s Burra Foods, but this deal came in the face of increased tension between the two countries.

This came to a head last week when the Chinese Government said it was looking at taking anti-dumping action against Australian wine imports.

Lion was already foreign owned, controlled by Japanese company Kirin, and clearing the sale to Mengniu was a chance to offer a peace deal to the Chinese.

Lion will now consider whether to keep the assets, managed by Kathy Karabatsas, or consider potential offers from Bega Dairy and Tanarra Capital.

“Lion notes that China Mengniu Dairy Company Limited (Mengniu Dairy) has been awaiting the outcome of the Foreign Investment Review Board (FIRB) review of its proposed purchase of Lion Dairy & Drinks,” Lion said in a statement.

“Given this approval is unlikely to be forthcoming at this time, Lion and Mengniu Dairy have mutually agreed to cease the current sale process. We are disappointed with this outcome and will now consider pathways forward in relation to the Lion Dairy & Drinks business,” it said.

Because the deal was withdrawn, Mr Frydenberg does not have to put out his own statement killing it, a move which may have inflamed tensions with China.