ACCC clears takeover of Lion Dairy and Drinks by China Mengniu

The competition regulator won’t oppose China Mengniu’s $600m purchase of Lion, giving it more control over the nation’s dairy assets.

The ACCC investigation focused on competition for the purchase of raw milk from dairy farmers in the Gippsland region. Picture: AFP

The competition regulator says it will not oppose the proposed $600m acquisition of Lion Dairy and Drinks by China Mengniu Dairy Company, handing the Chinese state-backed entity even more control over the nation’s dairy assets.

The Australian Competition and Consumer Commission reviewed the deal amid concerns the it could reduce competition and hurt dairy farmers.

Late last year Mengniu wrapped up the $1.5 billion takeover of Tasmanian-based infant milk formula group Bellamy’s.

Mengniu is proposing to acquire Lion D&D’s raw milk processing facilities in Australia, two of which are located at Chelsea and Morwell in Victoria.

The ACCC investigation examined whether the proposed acquisition would have an impact on competition for the purchase of raw milk from dairy farmers in the Gippsland region. Gippsland is the only area which has processing facilities ultimately owned by both Lion D&D and Mengniu.

Mengniu, through a subsidiary, has an indirect interest in Burra Foods, which has an existing raw milk processing facility at Korumburra in Victoria.

“While Burra and Lion D&D compete for the acquisition of raw milk, they are not close competitors, and our investigations concluded that dairy farmers are unlikely to switch between the two,” ACCC deputy chair Mick Keogh said.

“The level of aggregation from the proposed acquisition will be relatively low, with Burra and Lion D&D combined acquiring less than 25 per cent of raw milk in Gippsland.

“Two other large raw milk buyers remain in the Gippsland region, Saputo and Fonterra, as well as some smaller processors.”

The ACCC also found that there was considerable spare processing capacity at other raw milk processors in the Gippsland region, giving farmers alternative potential buyers for their milk.

China Mengniu Dairy is listed on the Hong Kong stock exchange and enmeshed in China Inc through its second biggest shareholder, the Chinese state-owned Cofco agricultural conglomerate.