“Can Do” Australia gives the Bellamy’s takeover by Chinese dairy giant the green light
The Bellamy’s share price roller-coaster back on the rise after China Mengniu takeover gets Australian government approval
15 November 2019 | Marcus Reubenstein
Australian infant formula producer Bellamy’s will enter a new a phase of its corporate life after Australia’s Foreign Investment Review Board (FIRB) recommended approval of a takeover of the company by China’s second largest milk products producer, China Mengniu Dairy Co.
The A$1.43 billion offer is conditional, including stipulation that the company’s headquarters must remain in Australia for at least ten years and that the majority of its board must be Australian citizens. These conditions will not be onerous as the premium attached to the brand is the fact that it is Australian, thus it makes no sense to strip it of its Australian management and production.
The company also committed to spending $12 million on its production facilities in, Australia’s second most populous state, Victoria. Following the FIRB review, Treasurer Josh Frydenberg announced the Federal Government’s approval, saying it was in the national interest.
“This approval will ensure Bellamy’s can continue to support jobs in Australia and strengthen its ability to expand its domestic market as well as its export opportunities, particularly into the growing Asian market. The decision will also provide opportunities for the suppliers that contribute to Bellamy’s products, including Australian dairy farmers,” Mr. Frydenberg said.
The takeover, by Hong Kong-Listed China Mengniu was announced last month, the price a 59% premium to its share value. Bloomberg called it a very attractive offer, saying the valuation put Bellamy’s at “Amazon.com” like multiples.
It’s been a rocky few years for both the company’s profitability and share price, after it failed to secure authorities to sell in Chinese retail outlets. Its share price plunged 66% in November 2016, and then recovered only to plunge from above $21 to just $7.50 in the weeks before the takeover offer.
For the financial year ending 30 June 2019, the company posted $328.7 million in earnings (65% increase), sales volumes improved 37% and Net Profit After Tax rose to A$42.8 million, compared to a loss of $0.8 million in the previous year.
At this week’s China Single’s Day online shopping festival, infant formula ranked as the third most popular category of imported goods across the A$56.2 billion sales bonanza. Bellamy’s ranked as the seventh most popular Australian brand, a position its new owners would be keen to improve.
Shareholder acceptance of the offer from China Mengniu of $13.25 per share was recommended by the Bellamy’s Board. In a statement to the ASX, the company says, “The Bellamy’s Board continues to unanimously recommend that Bellamy’s shareholders vote in favour of the Scheme at the upcoming Scheme Meeting.”
That meeting will be on 5 December 2019, the board saying, “In the absence of a superior proposal and subject to the independent expert continuing to conclude that the Scheme is in the best interests of Bellamy’s shareholders. Subject to those same qualifications, each Bellamy’s Director intends to vote all the Bellamy’s Shares held or controlled by them in favour of the Scheme.”
