Mengniu terminates the acquisition of Australia's second largest dairy company 09-17-2020

Mengniu announced on August 25, a day before the decision was finalized, that the acquisition of Lion-Dairy & Drinks Pty Ltd (LDD) was terminated, and that the termination would take effect at 12:01 a.m., August 25. According to the announcement, the reason for the termination is that the companies did not reach an agreement on one of the conditions within the contract deadline. Mengniu said that the termination of the acquisition of LDD will not have negative effect on Mengniu’s service, business, and financial situation.

Mengniu also said that the collaboration between Mengniu and LDD would have great potential and that the company expresses pity for the failure of this agreement.

On August 25, the parent company of LDD, Kirin Holdings Company, Ltd. (Kirin), also made a statement on this agreement. According to the statement, the Australian Competition and Consumer Commission (ACCC) had already confirmed that a transfer of shares would not be rejected, but Mengniu had been waiting for the result of the review by Australia’s Foreign Investment Review Board (FIRB). The statement wrote, “The approval by the FIRB is an essential part for this agreement, but unfortunately, until now, the FIRB has not responded to our request for their approval, and it is likely that the FIRB will also be unresponsive to future requests.”

Australian Treasurer hesitant to approve foreign acquisitions

Kirin also stated that the company will reconsider a future development strategy with LDD.

Considering other factors such as political factors, some experts in the dairy industry think the termination of this agreement is actually not a bad thing. On August 20, ACB News reported that according to well-informed sources, although the FIRB and the Ministry of Finance in Australia approved of Mengniu’s acquisition of LDD, Australian Treasurer Josh Frydenberg already rejected the acquisition.

According to a news report, on February 21, 2020, the Australian Competition and Consumer Commission announced that Mengniu’s acquisition of LDD would not have a negative impact on market competition and that it would approve the acquisition.

Mengniu revealed its plan of purchasing LDD with AUD 600 million on November 25, 2019. Before the announcement, Mengniu purchased another Australian dairy company, Bellamy’s Organic, with AUD 1.5 billion.

Data shows that LLD owns many leading dairy brands in Australia, including dairy drinks, yogurt, low temperature juice, as well as plant-based drinks. If the acquisition of LDD were successful, other Australian brands such as Dairy Farmers, Big M, Pura, Daily Juice, and Berri would be under Mengniu, and Mengniu’s business could expand to the food and agricultural industry in Australia.

Chinese milk in short supply, dairy industry looks to foreign producers

Mengniu’s CEO Min Lu mentioned that 95% of Mengniu’s milk comes from China, but this is not enough for the company, because local milk in China is in short supply, and the company needs imported milk from other countries.

According to Mengniu, the company could obtain fresh milk from Australia through the acquisition of LDD, as LDD has long term collaboration with 280 dairy farmers, which can provide a steady supply of 825 million liters of fresh milk.

In addition, if the acquisition of LDD were successful, Mengniu would work together with Burra Foods, which was acquired by Mengniu indirectly, Bellamy’s Organic and LDD, and the dairy supply would be able to meet the needs of markets in South Asia and China.


For more information, please check our Dairy Products China News.

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