A deal to sell the company behind some of Australia’s most popular milk brands to a Chinese firm has been called off.
Lion Dairy and Drinks – home to Big M, Dare Iced Coffee and Yoplait yoghurt – was to be sold to Chinese company Mengniu Dairy as announced by Japanese company Kirin in November 2019. However, the Foreign Investment Review Board (FIRB) has stopped the sale from being approved.
“We are disappointed with this outcome and will now consider pathways forward in relation to the Lion Dairy & Drinks business,” Lion said in a statement released on Tuesday morning.
The Australian Financial Review reported last week that federal Treasurer Josh Frydenberg, who has the ultimate say on deals considered by FIRB, did not support the transaction. Mr Frydenberg has said the deal would be “contrary to the national interest.”
However, both parties have said the ceasing of the deal was a mutual decision.
“Lion notes that China Mengniu Dairy Company Limited has been awaiting the outcome of the Foreign Investment Review Board review of its proposed purchase of Lion Dairy & Drinks,” the statement said. “Given this approval is unlikely to be forthcoming at this time, Lion and Mengniu Dairy have mutually agreed to cease the current sale process.
The deal has been blocked as the Morrison government begins discussions on draft legislation that will make permanent changes to the foreign investment approval process. Temporary amendments were created hastily at the height of the pandemic in March, with permanent measures expected to be put in place in January 2021.
The government is reforming the foreign investment framework to respond to increasing concerns regarding foreign takeovers of distressed local companies hit by the recession. The Federal Treasury outlines in the reform that “The Government will introduce a new national security test to ensure that it can act to address national security concerns arising from individual investment proposals which would otherwise be below the screening thresholds when the temporary $0 screening arrangements lapse.”