China Mengniu Dairy has called off its plan to buy an Australian drinks business for $430 million after the government in Australia said it would likely oppose the deal.
The proposed sale was canceled on Tuesday. The Australian company, Lion Dairy, and its owner, Japanese beverage giant Kirin, both said in separate statements that approval from regulators was “unlikely to” materialize.
Under the agreement, Kirin would have offloaded Lion Dairy — an Australian milk and juice business that is home to well-known brands such as Dairy Farmers, Pura and Vitasoy — to Mengniu. The deal, which was worth about 600 million Australian dollars ($430 million), was first announced last November.
Some regulators in Australia had already green-lit the deal. The Australian Competition and Consumer Commission said in February that it had looked into the matter and would not oppose the acquisition.
In recent months, though, tensions have deepened between Australia and China, spilling over into trade.
Australia has angered China by calling for a investigation into the origins of the coronavirus pandemic. Beijing later targeted its exports, namely by suspending some imports of beef and slapping heavy tariffs on barley.
And recently, reports had surfaced that the Mengniu deal could be scuttled. Both parties were still awaiting approval from Australia’s Foreign Investment Review Board, and last week, the Australian Financial Review reported, citing an unidentified source, that Treasurer Josh Frydenberg had moved to block the transaction.
The source told the newspaper that the decision was made due to “diplomatic issues.”
Frydenberg confirmed Tuesday that he had told Mengniu Dairy “that the proposed acquisition would be contrary to the national interest.”
The companies then moved to call off the deal.
“Given this approval is unlikely to be forthcoming at this time, Lion and Mengniu Dairy have mutually agreed to cease the current sale process,” Lion Dairy said in a statement. “We are disappointed with this outcome and will now consider pathways forward.”
Last week, the Chinese Commerce Ministry took aim at another industry. It announced an anti-dumping probe into imports of Australian wine.
Australian Trade Minister Simon Birmingham last Tuesday rejected claims of wine dumping, saying that he found the accusations “perplexing.”
“Australian wine is by no means subsidized and by no means sold at or below market rates in the world market,” he told reporters. “The Australian government will work closely with the wine industry to defend these allegations and help ensure we put forward the strongest of possible cases to prevent the application of tariffs or duties on our winemakers.”
— Vanesse Chan, Angus Watson and Ben Westcott contributed to this report.