Australia to Bar Chinese Dairy Takeover Attempt

Acquisition caught up in diplomatic tensions . . . 

In the latest move in a series of escalations, Australia is set to bar the acquisition by Chinese firm Mengniu of the parent company behind well-known Australian dairy brands such as Pura Milk, Dairy Farmers, and Yoplait. The C$570-million takeover attempt has been caught up in the tit-for-tat retaliation that began earlier this year when the Australian government took two stances that deeply angered the Chinese government: the push for an inquiry into the origins of the Coronavirus outbreak in Wuhan and joining a growing group of countries pushing to ban Chinese control of 5G infrastructure and technology in foreign countries.

An about-face on Chinese acquisitions . . .

The banning of this Chinese acquisition attempt stands in stark contrast to a deal last year that saw the Australian government allow the C$1.6-billion acquisition of Bellamy’s, an Australian-owned infant formula manufacturer. Additionally, the dairy-sector company at the centre of this new acquisition attempt is already under foreign ownership by the Japanese company Kirin’s Holding Co. Last Thursday, Mengniu, which is attempting to buy the group of brands from Kirin’s Holding, received a letter from Australia’s Treasurer Josh Frydenberg informing it that his preliminary view was that the acquisition should not proceed. According to the Australian Financial Review, Frydenberg’s decision contradicted the advice of Australia’s Foreign Investment Review Board. The newspaper identified “diplomatic issues” as the driving force behind the Treasurer’s decision.

Could Canada be next?

Canada has a long track record of allowing Chinese investment in its dairy sector. In 2016, Chinese milk producer Feihe International set up a production facility in Kingston, Ontario. One of China’s leading dairy producers, Beijing Sanyuan Foods Co. Ltd, also purchased majority ownership in Vancouver-based dairy producer Crowley Properties Ltd. It is hard to see the Canadian government declining a Chinese dairy-sector investment in Canada, but, as the Australian case demonstrates, sentiments can change quickly.