A key condition is that Bellamy’s HQ must remain in Australia for at least 10 years, and the Chinese firm will need to invest at least AUD$12m in establishing or improving infant milk formula processing facilities in Victoria.
The Tasmanian-owned firm started as a family business in 2004 and went publicly listed on the Australian Stock Exchange (ASX) in 2014.
Also, if acquired, the majority of Bellamy’s Board of Directors must be Australian resident citizens.
Its current Board of Directors is made up of five members according to its website.
The key conditions were announced by Australia’s national treasurer, Josh Frydenberg, on Friday (Nov 15).
As enforceable conditions, foreign investors that do not comply will be penalised according to the Foreign Acquisitions and Takeovers Act 1975.
Frydenberg has promised that the Treasury officials would monitor Mengniu’s compliance, local media ABC News reported.
With an offer of AUD$1.5bn, Bellamy’s is set to be the next Australian nutrition firm that will be acquired by the Chinese.
In the past two to three years, the Chinese has been actively acquiring health and nutrition manufacturers from Australia. Some high-profile cases include the takeover of Swisse by H&H at AUD$1.69bn in 2015/2016 and Lifespace by BY-HEALTH for AUD$670m last year.
Frydenberg said that the Chinese acquisition was “not contrary to the national interest” following an extensive period of consultation by the Foreign Investment Review Board (FIRB).
However, to ensure that the acquisition does not go against national interest, he has decided to impose the conditions.
Doing so will ensure that Bellamy’s can continue to support Australia’s job market, expand the domestic market while meeting export opportunities.
According to him, the firm ranks number four by market share in the country’s infant milk formula market.
“The Morrison Government welcomes foreign investment where it is consistent with our national interest. Without foreign capital and investment, Australia’s output, employment and standard of living would be lower,” said the statement.
“The conditional approval demonstrates our foreign investment rules can facilitate such an acquisition while giving assurance to the community that decisions are being made in a way which ensures that Australia's national interest is protected.”
NutraIngredients-Asia has reached out to Bellamy’s and Mengniu for comments.
Shareholders to vote
The next step of development will depend on Bellamy’s shareholders voting session next month.
The voting will take place on December 5, where shareholders will decide if they are agreeable with the acquisition.
According to the firm’s announcement on the ASX, the board has “unanimously recommended” the board to support the acquisition.
Australian politicians have raised concerns on a possible lack of supply for the domestic market if the deal was to take place.
Independent Tasmanian senator Jacqui Lambie was concerned that the sale might lead to a lack of infant formula supply for the Australians.
In response, Frydenburg maintained that the government was confident that the domestic market would not be affected.