Plans for the China Mengniu Dairy to purchase a dairy business in Australia are scrapped on August 25. This decision comes as the Australian government revealed that it could not approve such a move to go through. The supposed price tag for the deal was Australian $600 million ($430 million). There is also a recent rift between Australia and China, which affected trade.
Dealing with the Deal
In November last year, the Lion Dairy & Drinks agreed to sell to China Mengniu Dairy for this year. The Chinese company agreed to purchase the Australian beverage business from Japanese company Kirin. Earlier in the year, the Australian Competition & Consumer Commission, a body regulating competition in the country, okayed the deal.
Per the Lion Dairy’s statement, the unlikely approval of the deal, the two companies “mutually agreed” to cancel the purchase. The company expressed disappointment and added they “will now consider pathways forward.”
China Mengniu Dairy has called off its plan to buy an Australian drinks business for $430 million after the government in Australia said it would likely oppose the deal. https://t.co/aqoUHpPkG4
— CNN International (@cnni) August 25, 2020
However, Reuters noted that there is a report from last week indicating the Australian government could oppose the deal. In the Australian Financial Review, an anonymous source noted that the country’s Treasurer could prevent the purchase from happening. The source cited “diplomatic issues.”
On the same day, Australian Treasurer Josh Frydenberg revealed that he told Mengniu Dairy that if the transaction pushed through, it might be against “national interest.”
According to Kirin Holdings’ Termination of Agreement notice, the unlikely approval from FIRB (Foreign Investment Review Board) influenced the cancellation of the deal.
Kirin also dubbed in a statement the decision as “unfortunate.” However, they noted that the company’s top priority is the “revival and restructuring of Lion-Dairy and Drinks.” They further said they would proceed with looking for “best scenarios” for the business.
Furthermore, a Nikkei article reported an executive saying Kirin might look for another buyer of the Australian beverage business by this year.