The Australian Competition & Consumer Commission (ACCC) has approved the purchase of Lion Dairy & Drinks (Lion D&D) by China's Mengniu Dairy Company.
The regulator found that the acquisition will have a low impact on the competition for the purchase of raw milk from dairy farmers in the Gippsland region in the state Victoria.
Mengniu plans to buy Lion's raw milk processing facilities in Australia, 2 of which are located in Chelsea and Morwell in the Gippsland region of the state Victoria. Mengniu already owns processing facilities in that region, through subsidiary Burra Foods. That company has a raw milk processing facility at Korumburra, Victoria.
Lion owns iconic Australian dairy brands as Masters. Photo: René Groeneveld
"While Burra and Lion compete for the acquisition of raw milk, they are not close competitors, and our investigations concluded that dairy farmers are unlikely to switch between the two," deputy chair Mick Keogh of the ACCC said.
The ACCC points out that there is considerable spare processing capacity at other raw milk processors in the Gippsland region. 2 other large raw milk buyers remain in the Gippsland region, Saputo and Fonterra, as well as some smaller processors.
China Mengniu Dairy will pay the present owner of Lion D&D, Japanese beverage giant Kirin, AU$600 million (€360.18 million) for the Lion Dairy & Drinks portfolio. The Lion brands include iconic Australian dairy brands as Dairy Farmers, Masters and Pura milk, Dare and Farmers Union iced coffee, Big M, Dairy Farmers and Pura Classic flavoured milk, Farmers Union Greek Style yogurt and Yoplait yogurt.
Lion Dairy & Drinks buys about 825 million 'milk equivalent' litres a year from about 280 Australian dairy farmers. Photo René Groeneveld
Lion Dairy & Drinks employs around 2,300 people across Australia with others based in Singapore, Malaysia and China. It has 11 manufacturing sites around Australia. The company has been 'for sale' since late 2018. Lion wants to concentrate on its beer business. In April 2019 Lion reached an agreement with Canadian dairy giant Saputo to sell its speciality cheese division to Saputo for AU$280 million (€168.08 million).
Mengniu is a Chinese dairy company listed on the Hong Kong Stock Exchange. A subsidiary of Mengniu owns a 43.35% interest in Inner Mongolia Fuyuan International Industrial, which in turn owns 51.35% of Burra Foods. Mengniu also completed a 1.5 billion dollar takeover of Australian infant formula company Bellamy's last December.
Export channel to China
According to Lion the purchase of the Dairy & Drinks business will ensure that it has an owner that is in a good position to grow the business over the long term. Mengniu Dairy chief executive Jeffrey Minfang Lu has said the acquisition would benefit both Lion Dairy & Drinks and Mengniu Dairy.
Australian dairy farmers will profit because the purchase will open up an important export channel to China. Minfang Lu emphasised that Mengniu has a strong track record of maintaining sustainable development in the markets that it is in.
Lion Dairy & Drinks buys about 825 million 'milk equivalent' litres a year from around 280 Australian dairy farmers. Mengniu currently buys milk from dairy processors in New Zealand and Europe.
Once the acquisition is a fact, it will step up its purchases from Australian suppliers.
Mengniu still needs approval from the Foreign Investment Review Board (FIRB) before the deal can be finalised. Mengniu expects to get the green light from the FIRB before July this year. Independent MP Andrew Wilkie has advised the FIRB to reject the plans. Some Australians are concerned with the Chinese involvement in the Australian dairy industry.
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