China Mengniu Dairy Company is set to buy Lion Dairy & Drinks business for $600 million, it was announced today (25 November). The sale is subject to Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) approvals and other standard closing conditions.
The sale includes all white milk, milk-based beverages, yoghurt, juice and water ice brands and assets, a statement released by Lion confirmed. It also includes Lion Dairy & Drinks’ International business, and Dairy & Drinks’ share of the joint ventures Vitasoy Australia Products and Capitol Chilled Foods Australia and Dairy & Drinks’ licensing agreement for the Yoplait brand.
It will signal the full divestment of Lion's Dairy & Drinks business, following the finalised sale of its speciality cheese business to Saputo Dairy Australia for $280 million in October (Food & Drink Business 29/10/2019).
Ten days ago (15 November) Federal Treasurer Josh Frydenberg and FIRB gave the go-ahead for Mengniu’s $1.5 billion takeover of Bellamy’s Organic with conditions (Food & Drink Business 15/11/2019).
CEO Stuart Irvine announced said the sale of speciality cheese to Saputo made the company assess all options for the balance of the business.
“We believe that Mengniu Dairy, a specialty dairy player, is an ideal owner to take Dairy & Drinks forward, given its track record of investing in the Australian dairy industry, together with its global reach and deep capabilities.
“Bringing the businesses together will help drive Mengniu Dairy’s growth in the Australian domestic market, while also accelerating Dairy & Drinks’ aspirations in South East Asia and China.
“In addition, Dairy & Drinks will benefit from access to leading-edge dairy research and development capability and further investment as part of the Mengniu business,” he said.
In a company statement, Mengniu said the acquisition served three goals:
- Obtaining control of Target’s [Lion’s] high-quality assets represents another important milestone in formulating a complete regional integrated player with a multi-category/multi-brands portfolio to serve consumers in Asia Pacific
The Target has a portfolio of iconic dairy brands with No.1 market position in milk-based beverages, yoghurt, chilled juice and plant-based beverages in Australia. Its access to the significant volume of highly regarded Australian milk pool, its large scale of 13 manufacturing facilities across Australia and the extensive cold chain distribution network that service 35,000 customers, all make the Target Group a strong comprehensive vertically integrated dairy player in Australia. Together with the infant milk formula products offered by Bellamy’s upon completion of its acquisition by the Group, this extensive business layout would equip the Group with a stronger foundation to excel in the Asia Pacific markets. - Target’s portfolio of iconic household dairy brands with strong Australian heritage is highly attractive to consumers in the One-Belt-One-Road markets, and therefore provides significant market opportunities for the Company to unlock
Established in Australia, Target Group owns a portfolio of longstanding heritage household brands. Reputable for their quality and heritage, these products and brands will be well received by South East Asian and Chinese consumers. These iconic household brands will allow the Group to continue developing market-tailored, premium product offerings to customers in both existing and new markets and as such, realize tremendous market potentials in these regions. - Support high end UHT milk growth opportunity and synergies in supply chain
By producing the Group’s increasing ultra-heat treatment (UHT) milk products in Target Group’s manufacturing facilities in Australia, the Group could capture the profit margin previously reaped by third-party services providers. The Acquisition further opens-up potential raw milk and other ingredient sourcing opportunities which will bring about additional synergies within the Group. From a supply chain perspective, the collaboration between Target Group, Burra Foods and Bellamy’s will potentially generate even greater synergies while providing better products to consumers across the Asia-Pacific region.
Dairy & Drinks’ core activities in Australia are the manufacture, marketing, sales and distribution of white milk, flavoured milks, fresh dairy foods, and fruit juices. The Australian manufacturing footprint span 11 sites including milk, yoghurt and juice facilities.
The Dairy & Drinks business employs around 2300 people across Australia with some people based in Singapore, Malaysia and China. The portfolio includes Dairy Farmers, Pura, Dare, Farmers Union, Yoplait, Daily Juice, The Juice Brothers and Berri.
The business also has a joint venture with Vitasoy International Holdings, Vitasoy Australia Products, which manufactures, markets and sells plant-based products under the Vitasoy brand. There is also a joint venture with Bega Cheese called Capital Chilled Foods Australia which manufactures in the ACT and markets and sells products under the Canberra Milk brand. Under Licence from Sodima, Lion Dairy & Drinks also manufactures, markets and sells yoghurt and dairy desserts under the Yoplait brand in Australia. It also have the licence to sell and market the Yoplait brand in select South East Asian markets.
Lion Dairy & Drinks partners with 280 dairy farmers and 85 fruit growers across Australia.
Lion was advised by Deutsche Bank as financial adviser, with King & Wood Mallesons as legal adviser. Greenhill & Co Australia have acted as independent financial adviser to Lion.
