Bellamy’s up on bid talk

Infant-formula maker favours offer from China

BELLAMY’S has urged its shareholders to accept a $1.5 billion takeover bid but said the move into Chinese hands had nothing to do with fast-tracking the country’s regulation processes.

Shares in the ASX-listed infant-formula maker surged by more than 50 per cent at the open yesterday after it announced it had entered into a $13.25 cash-per-share takeover scheme with the China Mengniu Dairy Company.

The offer, which represents a 59 per cent premium to last week’s closing price of $8.32, has the backing of the Bellamy’s board, with shares in the company rising 56 per cent to a near 14-month peak of $12.98 in early trade.

Mengniu’s approach came after Bellamy’s – a one-time darling of the ASX – faced mounting challenges from regulatory delays as China cracked down on imports.

Mengniu chief executive Jeffrey Lu Minfang said Bellamy’s organic brand position, local operation and supply chain were critical to the bid. “Our sales growth ambitions for Bellamy’s in Australia, and the broader Asia Pacific region, will see investment in the local dairy industry to ensure the required capacity is in place to achieve these plans,” Mr Lu Minfang said.

Bellamy’s shares were last worth $13.25 in July 2018, with the price eroding over the past 12 months as delays in Chinese regulatory approval hit sales of infant formula.

The shares were worth as much as $11.96 in April after Bellamy’s secured three Chinese approvals for its non-organic branded formula, but the company is still waiting on backing from China’s State Administration for Market Regulations to sell organic formula in stores.

The delays weighed on Bellamy’s full-year results last month, with full-year profit halved and a medium-term revenue target pushed out past FY21. Bellamy’s chief executive Andrew Cohen admitted the regulatory environment had been challenging over the past couple of years but denied the Mengniu takeover would fasttrack the SAMR process.

“I don’t think this owner would change the likelihood of achieving this licence or when it would be achieved,” Mr Cohen said yesterday.

“I will point out that many (companies) are awaiting their licences … including Chinese businesses.”

A2 Milk was the first Australian producer to achieve the equivalent of SAMR registration in September 2017 – a development that preceded a near tripling of the company’s share price.