Business / Corporate

China dairy giant Mengniu buying Kirin's Australia assets for $419 million

Bloomberg

China Mengniu Dairy Co. has agreed to buy Kirin Holdings Co.’s Australian beverage unit Lion Dairy & Drinks for about ¥45.6 billion, the Chinese dairy giant’s latest foray into the continent.

Mengniu will pick up Lion’s milk, yogurt and juice products, while Kirin will keep Lion’s beer, wine and spirits business, the companies said in a statement Monday. The deal is expected to close in the first half of 2020, they said.

Mengniu has been eyeing overseas acquisitions as China’s appetite for milk and infant formula grows with its middle class. Mengniu’s deal follows an agreement in September to buy organic infant formula maker Bellamy’s Australia Ltd. for 1.5 billion Australian dollars ($1 billion), securing a premium brand in one of the fastest-growing segments of the dairy market.

China has been seeking to boost its local baby formula industry and restore confidence after the milk scandal in 2008 killed six children and poisoned 300,000 others. It will support domestic dairy producers in acquiring or setting up overseas bases, encourage foreign dairy firms to invest in China and tighten regulations on milk powder imports and online sales platforms.

Japan’s second-largest brewer has been narrowing its business scope to improve profitability amid a slump in beer consumption in its home market, where it’s also seeking to attract drinkers with higher-margin craft brews. Kirin started the sale process for its Lion Dairy & Drinks business last year. It agreed to sell its Australian cheese business to Canada’s Saputo Inc. earlier this year for ¥20 billion.

As part of its efforts to refocus, Kirin has been active in buying up craft beer companies. Last week, the Japanese brewer agreed to buy New Belgium Brewing, one of the world’s largest independent breweries and maker of Fat Tire Ale, for an undisclosed amount. Kirin declined to disclose the value of the deal, but an acquisition of this scale would be significant.

Kirin CEO Yoshinori Isozaki said in February that it has a ¥300 billion budget for acquisitions over the next three years, and with large M&A opportunities largely “exhausted” it is focusing on craft beer deals in America and Europe.