Bellamy’s sale to Mengniu Dairy follows four months of talks

China Mengniu Dairy Company has called on the services of HSBC and law firm Norton Rose Fulbright for its $1.5 billion takeover of Bellamy’s, while the Australian food and beverage company has been working with Morgan Stanley, law firm Allens and an independent adviser.

Morgan Stanley’s Luke Boeg was working on the transaction for Bellamy’s while Roshan Menon at HSBC advised Mengniu, which controls Victoria-based Burra Foods.

Bellamy’s also worked Matthew Hanning as an independent adviser.

Talks between both parties have been taking place for about four months to culminate in a takeover proposal that announced to the market on Monday.

Now the question remains as to whether Mengniu continues to pursue Lion Drinks and Dairy after recently re-engaging with advisers selling the business, Deustche Bank and Greenhill.

Mengniu had been in pursuit of Lion with the help of Macquarie Capital but initially, was understood to have put forward a price below the expectations of Lion’s Japanese owner, Kirin.

Asahi was recently in talks to buy the Lion business before it instead purchased the Carlton and United Breweries business for $16bn.

Now Pacific Equity Partners is believed to also be back in discussions, but volatile earnings linked to the country’s drought conditions may deter the buyout fund.

Fully funding the Bellamy’s acquisition for Mengniu is understood to be HSBC.

The $13.25 cash per share offer that includes a 60c fully franked special dividend is a premium of more than 59 per cent premium to Bellamy’s last closing price and represents an enterprise value of 30 times reported normalised earnings before interest, tax, depreciation and amortisation.

It comes after Bellamy’s shares fell below $4 in 2017 after it had once been a market darling, with the demise blamed on regulatory changes in China.

The transaction still requires foreign investment review board approval.