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Bellamy’s investors back China buyout

Bellamy’s investors have overwhelmingly approved a proposed $1.5 billion takeover by the China Mengniu Dairy Company. 

Thursday’s scheme proposal in Melbourne was supported by 99.23 per cent of shareholder votes – representing 82.88 per cent of Bellamy’s investors – with the company now set to apply to the Supreme Court of NSW for orders approving the deal next week. 

If the takeover clears that hurdle, the scheme is expected to be implemented on December 23. Bellamy’s shares will be transferred to Mengniu’s subsidiary for $13.25 cash per share, inclusive of a fully franked special dividend of 60 cents. 

The company’s stock had climbed by 0.76 per cent to $13.24 by 1216 AEDT after the vote, having surged by more than 50 per cent in one day after the Mengniu proposal was revealed in September. 

Last month Treasurer Josh Frydenberg backed the Foreign Investment Review Board’s view that the proposed acquisition by Mengniu was not contrary to Australia’s national interest.

He did however impose conditions on the deal, including that majority of the Bellamy’s board of directors will have to be Australian citizens and living in the country. The Treasurer also requires the Chinese buyer to invest at least $12 million in infant milk formula processing facilities in Victoria.

Bellamy’s board had unanimously recommended shareholders vote in favour of the scheme, but denied it had anything to do with fast-tracking Chinese regulation to allow expansion in the country. 

Industry research firm IBISWorld said Mengniu Dairy’s acquisition of Bellamy’s and pending acquisition of Lion Dairy and Drinks present new opportunities for Australia’s struggling agricultural sector.

While it says the acquisition would likely ease the entry of Australian dairy products into the Chinese consumer market, it could also threaten the supply of dairy products to Australian households.

‘Despite rising costs due to drought, Australian dairy producers remain attractive acquisition targets for Chinese firms. Water and livestock feed shortages in Inner Mongolia have increased Chinese reliance on imported dairy products. Companies such as Mengniu find it more cost-effective to buy dairy processing facilities overseas and transport products back to China,’ said IBISWorld Senior Industry Analyst, Matthew Reeves.

Bellamy’s inability to obtain approval from China’s State Administration for Market Regulation cost the company significant sales in the 2018-19 financial year, but through the acquisition by Mengniu, Bellamy’s and Lion will likely avoid these challenges in the future.

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