China Mengniu Dairy will pay Japanese beverage giant Kirin $600 million to take over its Lion Dairy & Drinks portfolio, the company said on Monday.
The Lion brands include several iconic brands including Dairy Farmers, Masters and Pura milk.
Its portfolio also includes Dare and Farmers Union iced coffee; Big M, Dairy Farmers and Pura Classic flavoured milk; Vitasoy soy milk and coconut milk; juice brands Daily Juice, The Juice Brothers and Berri; and Yoplait yogurt, under licence.
Lion has been trying to sell its dairy portfolio since October 2018, when it decided to concentrate on expanding its beer business including James Squire, Little Creatures, Tooheys and XXXX.
The company said it decided to approach Mengniu Dairy after reaching an agreement in April to sell the specialty cheese division of Lion Dairy & Drinks to Saputo Dairy for $280 million.
‘Best of the East and West’
“The full divestment of the Dairy & Drinks business will ensure it has an owner that is well-placed to grow the business over the long term, while also accelerating Lion’s pivot to becoming a leading global adult drinks business,” Lion chief executive Stuart Irvine said.
Dairy & Drinks employs around 2,300 people across Australia with others based in Singapore, Malaysia and China, and has 11 manufacturing sites around Australia.
Mengniu Dairy chief executive Jeffrey Minfang Lu said the acquisition would benefit both Lion Dairy & Drinks and Mengniu Dairy as well as providing opportunities for Australian dairy farmers and fruit growers, by opening up a significant channel to China.
“This acquisition brings together the best of the East and West, harnessing Mengniu Dairy’s networks in existing markets and D&D’s (Dairy and Drinks) leading brands and production capability,” Mr Lu said.
“I truly believe our proposed acquisition will bring tremendous opportunity for the entire Australian dairy sector, opening up a channel to our home market in a very significant way. We have a strong track record of maintaining sustainable development in the markets we are in, which has been beneficial to local communities and the broader economy.
The company buys about 825 million “milk equivalent” litres a year from around 280 Australian dairy farmers, as well as 50 million kilograms of fresh fruit from around 85 fruit growers.
Mengniu said it currently buys milk from dairy processors in New Zealand and Europe, and once the acquisition clears it would step up its purchases from Australian suppliers.
The proposed takeover needs to be approved by the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board (FIRB) before it can be finalised.
Mengniu said it is expecting to obtain approval from the regulators in the first half of 2020.
Its acquisition of Bellamy’s received FIRB approval on November 15 and will be voted on by shareholders on December 5.