More than a year after Lion announced plans to sell its Dairy & Drinks business, a deal has been done with China Mengniu Dairy Company for $600 million.
Lion and parent company, Kirin Holdings, reached an agreement with Mengniu Dairy to part with leading brands such as Dairy Farmers, Dare, Farmers Union, Pura, Berri, Daily Juice and The Juice Brothers.
The sale includes all of D&D’s milk, milk-based beverages, yoghurt, juice and water brands, as well as its international business, its share of joint ventures Vitasoy Australia Products and Capitol Chilled Foods Australia and the licensing agreement for Yoplait.
Lion CEO Stuart Irvine said Mengniu Dairy is an “ideal owner” to take the business forward, given its “track record of investing in the Australian dairy industry, together with its global reach and deep capabilities” and access to leading-edge dairy R&D.
“When we announced the decision to sell the Dairy & Drinks business last year, we made clear our intention to identify the best future ownership arrangements for the Dairy & Drinks business,” Lion CEO Stuart Irvine said in a statement on Monday.
“Our aim throughout has been to ensure that both Dairy & Drinks and the Lion business are ideally positioned for growth – with the right people, assets and investment behind their respective strategies.”
The deal is expected to help drive Mengniu Dairy’s growth in the Australian domestic market, while also accelerating Dairy & Drinks’ aspirations in South East Asia and China through Mengniu Dairy’s vast distribution networks in Asia.
Mengniu Dairy chief executive Jeffrey Minfang Lu said the acquisition “brings together the best of the East and West”.
“I truly believe our proposed acquisition will bring tremendous opportunity for the entire Australian dairy sector, opening up a channel to our home market in a very significant way,” he said.
“We have a strong track record of maintaining sustainable development in the markets we are in, which has been beneficial to local communities and the broader economy. It’s a win-win transaction for two leading dairy companies in Australia and China and represents a compelling opportunity for all stakeholders.”
The deal could also see Mengniu Dairy make strategic investments to drive product innovation and access new markets.
The Chinese dairy company recently got the all clear from the Foreign Investment Review Board (FIRB) for the $1.5 billion takeover of infant formula company Bellamy’s. The board laid down a number of conditions for the deal including a condition that it remains headquartered in Australia for a decade and must be run by a majority Australian board.
Mengniu Dairy currently sources a portion of its milk supply from dairy processors in New Zealand and Europe, but plans to “significantly increase” its procurement of raw milk from Australian dairy producers following the acquisition.
Lion Dairy & Drinks’ strong connection with Australian dairy farmers and fruit growers, sees the procurement of about 825 million litres each year from around 280 Australian dairy farmers and approximately 50 million kilograms of fruit from growers.
D&D runs 13 manufacturing facilities in Australia, with a national cold chain distribution network, delivering its products to more than 35,000 customers across multiple channels.
The deal represents a full divestment of the D&D business. In April, Lion Dairy & Drinks announced the sale of its specialty cheese business to Saputo Dairy Australia for $280 million. The deal was just finalised last month after the ACCC gave the green light.
The Mengniu Dairy deal, which is subject to the approval of the ACCC and Foreign Investment Review Board, is expected to complete in the first half of 2020.