Australia’s competition regulator approves Mengniu’s acquisition of Lion Drinks & Dairy

AUSTRALIA – The Australian Competition and Consumer Commission (ACCC) has approved Mengniu Dairy’s bid to acquire Kirin Holding’s Australian beverage unit Lion Dairy & Drinks for about US$419 million.

The Chinese dairy giant tabled the offer to acquire Lion Dairy & Drinks raw milk processing facilities in Australia, two of which are located in Chelsea and Morwell in Victoria in November last year.

The deal includes all white milk, milk-based beverages, yoghurt, juice and water ice brands and assets as well as Lion Dairy & Drinks’ International business, and Dairy & Drinks’ share of the joint ventures Vitasoy Australia Products and Capitol Chilled Foods Australia.

Lions Dairy & Drink’s portfolio includes Dairy Farmers, Pura, Dare, Farmers Union, Yoplait, Daily Juice, The Juice Brothers and Berri and operates 11 manufacturing sites in Australia.

While Mengniu, through a subsidiary, already has an indirect interest in Burra Foods – a raw milk processing facility located in Victoria – the competition watchdog said that the acquisition would not have an impact on competition for the purchase of raw milk from dairy farmers in the region.

“While Burra and Lion D&D 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,” ACCC Deputy Chair Mick Keogh said.

“The level of aggregation from the proposed acquisition will be relatively low, with Burra and Lion D&D combined acquiring less than 25 per cent of raw milk in Gippsland. Two other large raw milk buyers remain in the Gippsland region, Saputo and Fonterra, as well as some smaller processors.”

The ACCC also found there was considerable spare processing capacity at other raw milk processors in the Gippsland region, giving farmers alternative potential buyers for their milk.

A spokesperson for Mengniu said the transaction remains scheduled to complete in the first half of 2020.

“We are pleased with the decision by the ACCC to not oppose the proposed acquisition of Lion Dairy & Drinks and continue to work through other regulatory approval processes,” he said.

“We note that the ACCC has today announced it will not oppose the proposed acquisition. We welcome this outcome, which is an important step forward, and look forward to moving through the remaining regulatory approvals and completing the sale,” a Lion’s spokeswoman commented.

For the deal to close, Mengniu still requires approval from the Foreign Investment Review Board. The deal follows a recent approval by the Australian government to acquire local infant formula maker Bellamy’s Australia Ltd for AUD$1.43 billion (US$568 million).

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