Mengniu buys Lion Dairy and Drinks

By Jim Cornall contact

- Last updated on GMT

The deal includes brands such as Dairy Farmers, Pura, Dare, Farmers Union, and Yoplait.
The deal includes brands such as Dairy Farmers, Pura, Dare, Farmers Union, and Yoplait.

Related tags: mengniu

China Mengniu Dairy Company Limited is buying Lion-Dairy and Drinks Pty Ltd (LDD) from Japan’s Kirin Holdings Company Limited.

Kirin and Lion said they considered all options for LDD, from a continuation of investment and retaining the business to a sale of LDD. Kirin and Lion determined that the best option would be to transfer LDD to a third party that could maximize its growth potential.

Kirin Foods Australia entered into an agreement to sell LDD on a standalone basis to Monday Smoothie Pty Ltd, a subsidiary of Mengniu Dairy, which includes all white milk, milk-based beverages, yogurt, juice and water ice brands and assets. It also includes LDD’s international business, and its share of joint venture businesses.

The sale is subject to Australian Competition & Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) approvals and other standard closing conditions.

The transaction as expected to complete in the first half of 2020.The sale price of LDD to Monday Smoothie is approximately A$600m (US$407m).

Lion had already sold its specialty cheese business to Saputo Dairy Australia for A$280m (US$190m), a subsidiary of Canada’s Saputo Inc., which concluded on October 28.

LDD procures approximately 825m liters of milk equivalent and 50m kilograms of fresh fruit from approximately 280 farmers and 85 fruit growers annually. It has manufacturing and cold chain distribution capabilities across Australia, with a total of 13 manufacturing facilities (inclusive of two facilities operating as joint ventures) and a cold chain distribution network reaching 35,000 customers.  The Dairy & Drinks business employs around 2,300 people across Australia, as well as some in Singapore, Malaysia and China.

LDD also has a presence in international markets including South East Asia and China (currently, primarily through yogurt products).

Mengniu said that together with the infant milk formula products offered by Bellamy’s upon completion of its acquisition by the group, the ‘extensive business layout’ would equip the group with a stronger foundation to excel in the Asia Pacific markets.

LDD’s portfolio of household dairy brands with strong Australian heritage is highly attractive to consumers in South East Asia, Mengniu said, adding that it can develop market-tailored, premium product offerings to customers in both existing and new markets and as such, realize market potentials in these regions.

Mengniu said by producing its increasing ultra-heat treatment (UHT) milk products in LDD’s manufacturing facilities in Australia, it could capture the profit margin previously reaped by third-party services providers. The acquisition further opens-up potential raw milk and other ingredient sourcing opportunities, which will bring about additional synergies within the group.

From a supply chain perspective, the collaboration between LDD, Burra Foods and Bellamy’s will potentially generate even greater synergies while providing better products to consumers across the Asia-Pacific region, Mengniu added.

Related topics: Manufacturers, Emerging Markets

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