Bellamy’s takeover by China Mengniu Dairy approved by FIRB

Bellamy’s shares jump after FIRB allows its $1.5bn takeover by China Mengniu Dairy, with conditions.

Bellamy’s formula

The Foreign Investment Review Board has approved the $1.5 billion takeover of Bellamy’s by China Mengniu Dairy Company, although the infant formula maker will have to remain headquartered in Australia for a decade and run by a majority Australian board.

Treasurer Josh Frydenberg has backed the FIRB’s view that the acquisition is not contrary to Australia’s national interest, but imposed conditions including that majority of the Bellamy’s board of directors will have to be Australian resident citizens.

The Treasurer also requires the Chinese buyer to invest at least $12 million in infant milk formula processing facilities in Victoria.

“The conditional approval demonstrates our foreign investment rules can facilitate such an acquisition while giving assuranceto the community that decisions are being made in a way which ensures that Australia’s national interest is protected,” Mr Frydenberg said in a statement on Friday.

Bellamy’s shares jumped as much as 2.1 per cent to $13.22 in the minutes after Friday’s open, their highest values ince July 2018.

Shares in Bellamy’s, which is No. 4 by market share in the Australian infant formula market, surged by more than 50 per cent on one day in September when China Mengniu Dairy Company’s $13.25 cash-per-share bid was announced.

The board of the Tasmania-based company unanimously recommended shareholders vote in favour of the proposal, but denied it had anything to do with fast- tracking Chinese regulation to allow expansion in the country.

After a lengthy wait, Bellamy’s is still waiting on backing from China’s State Administration for Market Regulations to sell organic formula in stores.

Bellamy’s acknowledged the FIRB approval in a statement to the ASX on Friday and recommended that shareholders vote in favour of the takeover at a meeting on December 5 in the absence of a better offer and subject to an independent expert’s view it is in their best interests.

Bellamy’s announced in September its board had backed the takeover offer and declared the proposal good for Australian manufacturing and investment.

READ MORE: China Mengniu Dairy’s Bellamy’s bid sweet enough, say analysts | Bellamy’s set to be bought by China Mengniu Dairy for $1.5bn

Bellamy’s Australia deputy chairman John Murphy said Mengniu, which is listed on the Hong Kong stock exchange, had opened discussions with the FIRB, which Bellamy’s was supporting.

“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,” he said. “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.

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.”

With AAP