Bellamy’s set to be bought by China Mengniu Dairy for $1.5bn

Bellamy’s says wider issues with China should not overshadow the benefits of its $1.5bn sale to dairy giant Mengniu.

Bellamy’s formula

Bellamy’s Australia deputy chairman John Murphy believes China Mengniu Dairy’s $1.5 billion takeover bid for the infant milk formula business will “tick a lot of boxes” for all stakeholders, from governments to consumers, and is hopeful the bid won’t be tripped up by the Foreign Investment Review Board.

Speaking to The Australian after Bellamy’s announced its board had unanimously backed an offer from Mengniu of $12.65 a share in cash, Mr Murphy said the takeover proposal was good for Australian manufacturing and investment, and was also part of a wider theme of consolidation in the consumer goods industry.

Nor were there any conspiracy theories around China’s delays in granting Bellamy’s an import licence.

Mr Murphy argued that any issues around trade tensions between China and the US or the wider western world should not overshadow the advantages and benefits of the takeover proposal.

Mengniu, which is listed on the Hong Kong stock exchange, has already begun its opening discussions with the FIRB, which Bellamy’s was supporting.

“The other party is leading that process on FIRB, we continue to be fully engaged and respect that process, and we are positive about what the outcome might be,’’ Mr Murphy told The Australian.

“It ticks a lot of boxes for Australia and what it supports in terms of ongoing supply chain manufacturing presence, organic (milk) pool, employees – we think it ticks a lot of boxes.

“In terms of Australian manufacturing, Australian sourcing … ticking employment, building a bigger business, investing in brands, continuing to have a presence in Australia with a divisional office. And all we’re seeing, we can only just comment on the different stakeholders across the whole community and landscape and we think this is a very positive outcome on those fronts.’’

Mr Murphy said there “was no conspiracy” surrounding the takeover, given Bellamy’s has had its Chinese import licence delayed for more than a year for unexplained reasons and is now suddenly the target of a takeover by a Chinese company whose biggest shareholders includes a state-owned enterprise.

“I think when we look at it, our licence, we are not the only ones … there are a lot of players globally in businesses waiting for a licence so there is no conspiracy element to this, the process, and we respect that.”

Bellamy’s chief executive Andrew Cohen said both companies remained confident the licence would ultimately be granted.

Announcing shareholder backing for the deal, Bellamy’s said shareholders will also receive a 60c special dividend paid by the company before the takeover is implemented.

The offer marks a 59 per cent premium to the last closing price for Bellamy’s.

Bellamy’s shares surged by as much as 55 per cent in lunchtime trade to $12.92.

“This transaction can further deliver on our founder’s original vision of a truly iconic Australian brand,” Mr Cohen said.

Mengniu’s approach came after Bellamy’s - a one-time market darling - faced mounting challenges from regulatory delays as China cracked down on imports.

Mengniu chief executive Jeffrey Lu Minfang said Bellamy’s organic brand position, local operation and supply chain were critical to the bid.

“Bellamy’s is a leading Australian brand with a proud Tasmanian heritage and track record of supplying high quality organic products to Australian mums and dads,” Mr Lu Minfang said.

“Our sales growth ambitions for Bellamy’s in Australia, and the broader Asia Pacific region, will see investment in the local dairy industry to ensure the required capacity is in place to achieve these plans.”

Bellamy’s shares were last worth $13.25 in July 2018, with the price eroding over the past 12 months as delays in Chinese regulatory approval hit sales of infant formula.

The shares were worth as much as $11.96 in April after Bellamy’s secured three Chinese approvals for its non-organic branded formula, but the company is still waiting on backing from China’s State Administration for Market Regulations to sell organic formula.

The delays weighed on Bellamy’s full year results last month, with full-year profit halved and a medium-term revenue target pushed out past FY21. Bellamy’s chief executive Andrew Cohen admitted the regulatory environment had been challenging over the past couple of years but denied the Mengniu takeover would fast-track the SAMR process.

“I don’t think this owner would change the likelihood of achieving this licence or when it would be achieved,” Mr Cohen said. “I will point out that many (companies) are awaiting their licences... including Chinese businesses.”

Mr Cohen also said Mengniu was “an ideal partner for (the) business” and offered “a strong platform for distribution and success in China, and a foundation for growth in the organic dairy and food industry in Australia”.

Founded in Tasmania and listed on the Australian Securities Exchange in 2014, Bellamy’s produces, supplies and markets a range of organic food and infant formula for babies and toddlers. Its products are distributed in Australia, Vietnam, Singapore, Malaysia, New Zealand and China.

Mengniu manufacture and distributes dairy products in China, and has manufacturing sites in New Zealand and in Indonesia.

The offer remains subject to a number of conditions, including approval by Bellamy’s shareholders and clearance by the Australian Foreign Investment Review Board.

The deal represents the first Chinese takeover of an infant milk formula group and biggest Chinese agri takeover in dairy sector since Chinese bought Van Diemens Land dairy in 2016.

With Dow Jones, AAP