China Mengniu to buy Australia infant food maker Bellamy's for $1 billion
16 Sep 2019
China Mengniu Dairy Co on Sunday announced a plan to acquire infant food maker Bellamy’s Australia Ltd for A$1.43 billion ($983 million), in a move that would open up the vast Chinese market for the Australian company.
The deal provides Mengniu with a prized consumer brand while for Bellamy’s investors it opens up prospects of approval to sell product in Chinese market. Foreign brands come as a blessing for investors in China’s scandal-hit dairy market.
“We were approached (and) we thought long and hard around potential opportunities and risks against our current plan, which we were very confident in,” Bellamy’s CEO Andrew Cohen said.
“On balance, we believe this is a fair and good offer for shareholders,” he added on an analyst call.
Bellamy’s profits halved in the year to June, as a Chinese rule requiring online purchases to be cleared through state-approved warehouses crimped its informal “daigou” exports to China.
Mengniu CEO Lu Minfang, however, said the world’s second-biggest dairy company was drawn to Bellamy’s reputation for quality and its supply chain in Australia and that the company had growth ambitions for Bellamy's in Australia and the broader Asia-Pacific region.
Bellamy’s shares touched a high of A$12.98, but stayed below the total offer price of A$13.25 as investors left room for the possibility of the deal falling through. The offer is at a 59 per cent premium to the last closing price.
When the former family business from the island state of Tasmania listed five years ago, its shares were issued at A$1 but traded over A$23 amid hopes the company would capitalise on seemingly insatiable demand for its formula in China.
In its annual report, Bellamy’s said it was still waiting for an approval from China’s State Administration for Market Regulation to ship formula to the country from an Australian facility it purchased in 2017.
It had also pushed out an A$500 million a annual sales target by at least a year, for want of full Chinese regulatory clearance.
“Mengniu will likely fast-track BAL’s strategy, particularly in China,” Moore added.
The Mengniu-Bellamy’s deal, however, still requires Australian regulatory nod.
Bellamy’s Deputy Chair John Murphy said the company was cooperating with the regulator and that the process “has a way to run (but) we’re feeling very positive”.
Bellamy's CEO said Mengniu is an "ideal partner", offering a strong platform for distribution in China and that the company has recommended shareholders vote in favour of a proposed $1 billion takeover by Chinese company Mengniu.
The potential takeover offers a significant 59 per cent premium to the last closing price for Bellamy's shares. Shares closed on 13 September at $8.32, and the offer from Mengniu is $12.65 per share and a $0.60 dividend per share.
The board of Bellamy's has unanimously recommended that shareholders vote in favour of the offer.
The deal is subject to Foreign Investment Review Board approval. Board member John Murphy said he is hopeful that FIRB approval will be granted.
"At this stage we're in the process with FIRB. We're having full engagement and are co-operating in that process. It has a way to run, but we're feeling very positive. We don't want to get ahead of that process, we'll let it play through but at this stage we're feeling very positive that it will run a course."
Australia’s Foreign Investment Review Board (FIRB) has taken a hard line in recent years on Chinese takeovers of assets like gas pipelines and agricultural holdings deemed sensitive from a national security perspective.