Australia may block China Mengniu Dairy’s Lion Dairy & Drinks acquisition

The Australian Government may block China Mengniu Dairy’s acquisition of Lion Dairy & Drinks, due to ‘diplomatic issues’.

The Australian Financial Review (AFR) reported that Treasurer Josh Frydenberg went against the Foreign Investment Review Board and Treasury, which advised him to approve the deal.

Tensions between the two countries arose after the Chinese Government launched an anti-dumping probe into wine imports from Australia.

Diplomatic relations between the two countries reportedly deteriorated after Australia urged for an independent probe into the origins of Covid-19.

A source familiar with the development told the AFR: “We now have a foreign investment regulatory regime that is entirely aimed at China that affects everyone across the board.”

The deal was first announced last November after Mengniu Dairy signed an agreement with Kirin Holdings and Lion to acquire the latter’s Dairy & Drinks business in Australia for A$600m ($407m).

In February, the Australian Competition and Consumer Commission (ACCC) also approved Mengniu Dairy’s proposal to acquire Lion Dairy & Drinks.

The competition authority noted that it approved the proposal after examining the potential impact the deal may have on competition in the country.

Last September, China Mengniu Dairy agreed to acquire 100% of the issued share capital of infant formula producer Bellamy’s Australia for A$1.5bn ($1.03bn) by signing a scheme implementation deed.

At that time, Frydenberg’s approved the deal with some Nationals MPs reportedly unhappy with the Treasurer’s decision.