Lion Australia boss Stuart Irvine is hoping politics doesn’t get in the way of his $600 million sale of Lion Dairy and Drinks to China Mengniu Dairy Company.
The November deal was cleared by the Australian Competition and Consumer Commission in February and according to some reports the Foreign Investment Review Board has also given the sale the go-ahead, with its report sitting on Treasurer Josh Frydemberg’s desk.
The Chinese state-backed Mengniu is already a big owner of Australian dairy, having spent $1.5 billion to buy infant formula group Bellamy’s last year.
That deal was cleared by Frydenberg after he imposed conditions including retaining an Australian head office for 10 years, investing $12 million in Australian dairy and maintain a majority of Australian directors.
The conditions were considered strict at the time but the political heat against China has ramped up considerably since then, in the wake of COVID-19.
If, as speculated, the FIRB report is completed, then Frydenberg has a tricky balance about when to announce any deal.
The Chinese government is already talking about boycotts on Australian farm products and there are worries about iron ore exports.
This would make it difficult for Frydenberg to unveil his decision to sell the producer of Pura Milk, Big M and Berri fruit juices to a Chinese company.
In this case Mengniu already controls Burra Foods in Victoria’s Gippsland region and the combined company would buy around 25 per cent of Gippsland milk.
Lion’s Irvine has tried to sell his dairy assets for 18 months or more, so blocking the sale would be a huge blow to him and to Lion Dairy and Drinks boss Kathy Karabatsas.
Frydenberg has recently floated a significant tightening of foreign investment rules to increase the weight of security considerations in the approval process.
On the surface this should not effect a dairy deal, but the politics are difficult for Frydenberg, who has a few other issues on his plate.
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