Impasse on Lion dairy business sale to China Mengniu Dairy Co
Beverage group Lion will have to find another buyer for its dairy business after the sale to China Mengniu Dairy Company was blocked.
JAPANESE beverage group Lion and China Mengniu Dairy Company Limited have scrapped the sale deal for Lion’s dairy business after Treasurer Josh Frydenberg blocked the transaction.
The sale, struck last November, would have seen the sale of its white milk, milk beverages, yoghurt, juice and water under brands such as Big M, Dairy Farmers and Pura to Mengniu for $600 million.
It would have ended Lion’s investment in dairy products, after it sold a range of cheese brands to Canadian private dairy company Saputo Inc in October last year for $280 million.
Mengniu Dairy, which already owns Burra Foods in Gippsland, is 16 per cent owned by COFCO, a Chinese Government controlled entity.
The Lion deal had received approval from the Australian Competition and Consumer Commission in February and was awaiting the backing of the Foreign Investment Review Board.
Mr Frydenberg was tight-lipped this week about the blocking of the deal.
“The Government does not comment on the details of foreign investment screening arrangements as they apply, or could apply, to particular cases,” he said.
A spokeswoman for Lion said the company had been awaiting FIRB approval.
“Given this approval is unlikely to be forthcoming at this time, Lion and Mengniu Dairy have mutually agreed to cease the current sale process,” she said.
“We are disappointed with this outcome and will now consider pathways forward in relation to the Lion Dairy & Drinks business.”
Queensland Liberal National Party member for Gympie and State Opposition agriculture spokesman Tony Perrett raised concerns about the sale of the Lion dairy stable to Mr Frydenberg in April, saying the sale would hurt farmers and cost local jobs.
“Like many Queenslanders, I have grave concerns about major food processor brands being purchased by Chinese companies with close ties to the Chinese Government,” Mr Perrett said in a letter published in The Weekly Times.
Mr Perrett welcomed the Treasurer’s move this week, saying Queenslanders held
legitimate concerns about major food processor brands being purchased by companies with
close ties to the Chinese Government.
“As one of the largest dairy processors in the state, Queenslanders had every right to be
concerned that this was just another example of a ‘fire sale’ of our essential and important
food-processing assets,” he said.
“The wrong decision could have had serious implications for Queensland consumers and
farmers.
“We did not believe the sale was in the national interest and this decision proves that.”
Mr Frydenberg’s action comes as a number of Australian dairy companies have been blocked by the Chinese Government from selling infant formula directly into bricks and mortar retail outlets in China for more than two years.
Tasmanian Greens Senator Peter Whish-Wilson called for an inquiry into Chinese market manipulation in the dairy industry after China Mengniu bought out organic infant formula manufacturer Bellamy’s Organic late last year.
Senator Whish-Wilson told The Weekly Times that inquiry was still continuing.
He said LD & D held about 6-8 per cent of the dairy market in Australia and he wanted assurances its brands would continue and Australian jobs remained in place.
“If that raw milk got channelled into infant formula for the Chinese market, what effect would that have on competition in Australia?” he said.
Senator Whish-Wilson said while he was not opposed to foreign investment, he supported Mr Frydenberg’s call on LD & D at this point in time.
Australian Dairy Farmers president Terry Richardson said Lion Dairy and Drinks was a significant Australian dairy business, and the peak dairy-farmer body was interested in understanding the implications of Mr Frydenberg’s decision further.
“Our focus is on the farmers who supply Lion and we will be talking to government and industry about what this decision means for those farmers,” Mr Richardson said.
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