Chinese to get Lion’s share of Aussie milk

THE Chinese owner of infant formula maker Bellamy’s Australia has been given the green light to snap up Pura, Big M and Farmers Union, making it a major new force in the nation’s dairy sector.

The Australian Competition and Consumer Commission has announced it will not oppose China Mengniu Dairy Company buying Lion Dairy and Drinks.

The $600 million acquisition will hand Mengniu nine dairy processing plants and brands including Pura, Big M, Dare, Farmers Union, Yoplait and Dairy Farmers, as well as Berri juice and Zooper Dooper flavoured iceblocks.

It will also make Mengniu, backed by the Chinese government, a major new player in the nation’s dairy sector.

Lion Dairy and Drinks is currently owned by Japanese beverage heavyweight Kirin.

Mengniu has taken a keen interest in Australian dairy, wrapping up a deal to buy Tasmanian-based Bellamy’s for $1.5 billion late last year.

The competition watchdog’s examination of the Lion deal zoomed in on the impact it would have on competition for the purchase of raw milk from dairy farmers in Victoria’s Gippsland region.

Mengniu and Lion both own processing plants in this area, raising concerns the deal would unfairly limit competition for farmers.

Mengniu, via an interest in Burra Foods, already has a stake in a processing facility in Gippsland’s south west.

Under the proposed Lion deal, Mengniu will take over processing plants at Chelsea, in Melbourne’s south east, and at Morwell. ACCC deputy chair Mick Keogh said while Burra and Lion competed for the acquisition of raw milk, they were not close competitors.

“The level of aggregation from the proposed acquisition will be relatively low, with Burra and Lion Dairy and Drinks combined acquiring less than 25 per cent of raw milk in Gippsland,” Mr Keogh said.

“Two other large raw milk buyers remain in the Gippsland region, Saputo and Fonterra, as well as some smaller processors.”

Mr Keogh said there was “considerable” spare processing capacity at other raw milk processors in the Gippsland region, giving farmers alternative potential buyers for their milk.

Mengniu is based in China’s Inner Mongolia region and listed on the Hong Kong Stock Exchange.

It has a 43.3 per cent stake in Fuyuan International Industrial which, in turn, is the majority owner of Victoria’s Burra Foods.

Its bid to buy Lion’s dairy business must still be signed off on by the Foreign Investment Review Board.

Lion’s diary business and its much-loved brands have been foreign-owned since Melbourne-based National Foods was bought by Philippine brewing giant San Miguel for $1.8 billion in 2004.

THE LEVEL OF AGGREGATION FROM THE PROPOSED ACQUISITION WILL BE RELATIVELY LOW

MICK KEOGH, ACCC