Organic infant formula maker Bellamy’s Australia will be swallowed by China Mengnui Dairy Company after long time backer and key shareholder Jan Cameron backed the $1.5 billion takeover.
Proxy votes showed Thursday morning that 98.92 per cent of votes were in favour of the controversial deal. Ms Cameron was the last major shareholder to play her cards with fellow Apple Isle resident, Bruce Neill, already saying he would vote in favour, and urged others to follow suit.
Ms Cameron — who just weeks after the deal was announced in September sold down her position due to a cap and collar agreement with JPMorgan – has kept silent on Mengnui Dairy, which is also poised to buy dairy processor Lion Dairy & Drinks from Japan’s Kirin. Mengnui Dairy already owns a majority stake in Victoria’s Burra Foods.
In 2017 Ms Cameron successfully spilled the Bellamy’s board, including the ousting of her one-time friend and former chairman Rob Woolley, taking control of the company which had nearly collapsed and shocked the market with profit downgrades as it sales stumbled in China.
While these takeovers may be good for the struggling agricultural sector, these acquisitions also have renewed debate over foreign ownership of Australian businesses.
The scheme meeting took place in Melbourne, where about 50 people attended on Thursday, comes as a Senate committee explores whether there was any market “manipulation” by the Hong Kong-listed giant which has revalue of more than $US2 billion ($2.9 billion).
So far Bellamy’s has been unable to gain the needed regulatory approvals to sell it’s Chinese labelled infant formula in retail outlets in China.
The significant lapse in getting the ticks from Beijing, caused a 62 per cent plunge in Bellamy’s share price over 18 months, before Mengnui swooped in September with a buyout offer at a 59 per cent premium to where Bellamy’s was trading immediately before the news.
The Greens and Labor agreed to hold an inquiry into the Foreign Investment Review Board and anti-money laundering rules. Greens Tasmanian Senator Peter Whish-Wilson has said recent FIRB approvals had exposed flaws in the system.
Treasurer Josh Frydenberg last month approved the Bellamy’s takeover, subject to conditions, such as that its headquarters stay in Australia for at least 10 more years, it has local board members and spends at least $12 million to establish or improve milk formula processing facilities in Victoria.
While 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.
IBISWorld senior industry analyst Matthew Reeves said Australian suppliers in the agricultural sector have found it difficult to enter the Chinese market due to issues of trust and reliability with Chinese regulators and distributors.
He said via Mengniu, Bellamy’s and Lion will likely avoid these challenges in the future, which would be a major boost to the baby food and milk and cream processing industries.
Mr Reeves said 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,” he said. “Companies such as Mengniu find it more cost-effective to buy dairy processing facilities overseas and transport products back to China.”
However, he added that future purchases of local companies by foreign firms may be met with regulatory and political hurdles given foreign ownership of domestic dairy enterprises could redirect supply to export markets, increasing prices and threatening supply for Australian households.
Mengnui has refused several interview requests, including questions about the political controversy and if it participated in alleged market manipulation.
Unable to follow, try again