The capital market was shocked by the A$1.5 billion bid that China’s leading diary products provider Mengniu made to acquire Australia’s organic infant formula brand Bellamy’s. This M&A case, although not yet approved by local authorities, has been year 2019’s first big move in Chine to Australian ODI.

The Inner-Mongolians Are Serious

Apart from the rumors in the past a few months, Bellamy’s — Mengniu collaboration has a good chance to realize. Mengniu in September 16, 2019, announced its ambition to take over Bellamy’s 100%.


Here is the full amercement from the Inner-Mongolian dairy giant:

The Scheme Consideration is AUD12.65 per Scheme Share. The Scheme Consideration was determined with reference to (i) the operating performance of the Target; (ii) the Target’s historical trading price and the premia to trading price in recent comparable public takeover transactions in the ASX; (iii) the multiples of precedent transactions in the IMF space and the trading multiples of comparable public companies; and (iv) the Company’s assessment of the value of the Target to the Group, including the prospects of the Target’s growth both domestically in Australia and internationally in China and Southeast Asia. As at the date of this announcement, there were 110,119,815 Target Shares in issue (excluding the Excluded Shares) and 5,231,993 Target Options granted and outstanding. 

Pursuant to the Scheme Implementation Deed, all outstanding Target Options will be vested and exercised, or vested and settled, in accordance with the terms of the Target Options or canceled in accordance with the Scheme Implementation Deed by the Scheme Record Date. The total consideration payable by the Company for the Scheme Shares is up to AUD1.46 billion (equivalent to approximately HK$7.86 billion). The Company expects to finance the Proposed Acquisition from a combination of internal resources and bank financing. Furthermore, under the Scheme Implementation Deed, Target is permitted to pay a special dividend of AUD0.60 per Scheme Share, conditional on the Scheme becoming effective.—quoted from

A 55% Rise Before the Deal Officially Done


As we know, Mengniu Dairy has offered 1.5 billion Australian dollars to buy infant formula maker Bellamy’s. Bellamy’s said its board had unanimously recommended shareholders vote to accept the all-cash bid, which represented a 59% premium to the company’s closing price by the day of announcement.


The deal is still subject to approval from Australian regulators. Shares in Mengniu slumped 2.8% in Hong Kong on Monday, dragging down the broader Hang Seng Index (HSI), which was down about 1%. Shares in Bellamy’s soared 55% in Sydney.

Bellamy’s Organic baby food packages in different flavors on supermarket shelf. Mengniu is “an ideal partner for our business. It offers a strong platform for distribution and success in China, and a foundation for growth in the organic dairy and food industry in Australia,” Andrew Cohen, Bellamy’s CEO, said in a press release.

Bellamy’s brand position and supply chain are “critical to Mengniu,” said Jeffrey Minfang Lu, Mengniu’s CEO, adding that the Chinese company aims to grow Bellamy’s sales in Australia and the Asia Pacific region.

Earlier this year, China’s top economic planning body said it wants domestic production of baby formula to be above 60% within three years. Domestic infant and toddler milk formula accounted for about 44% of the market in 2018, according to data analytics company Nielsen.

China’s National Development and Reform Commission also said the country will improve the quality of infant formula to boost consumer confidence, state-own news agency Xinhua reports.

Infant formula has been a source of controversy in China in the past. In 2008, tainted milk in China killed at least six babies and sickened about 300,000 others. Raw milk used to produce powdered baby formula had been watered down and the chemical melamine was added to fool quality checks. More than a decade later, some Chinese parents are still wary of local dairy brands.

The global baby food and infant formula market was worth $52.9 billion in 2018, and China was the largest importer of baby formula,according to a recent report from—-edited from Sherisse PhamCNN Business

A ‘Make or Break’ Offer For Bellamy’s

Graeme Cureton, the former Guinness Peat Group executive director and initial Bellamy’s Australia investor, says he backs the offer by the Chinese looking to takeover the local infant formula player.

Mr Cureton told The Australian Financial Review(AFR): “I think its a good price. This mob is a natural owner. I can’t see why FIRB would carry on. Bellamy’s is fundamentally a brand and everything else is subcontracted out. They own [their] Camperdown facility but that’s it.”


On September 16, the board of Bellamy’s unanimously recommended the $13.25 cash per share offer which comprises $12.65 cash per share and a 60¢ per share fully franked special dividend lobbed by Mengniu Dairy Company. The cash amount is a 59 per cent premium to Bellamy’s closing price on Friday and values the company at $1.5 billion.

The pair had been in talks for months about working together, but only in the past two weeks got serious about a takeover of the organic baby food and formula maker that was founded in the Apple Isle.

It is not clear if there is support from other major shareholders such as long time investor Bruce Neill and Singapore hedge fund Broad Peak, which recently upped its stake.

An independent dairy analyst in China, Song Liang, said it would be wise for Bellamy’s to merge with a Chinese company, otherwise, “Bellamy’s will be dead.” “China and Australia have a ‘frosty’ relationship and it has cast a shadow over the (Bellamy’s) business,” he said. “Australian companies are not treated equally (compared to other foreign companies) in some aspects.”

Partnership between A2 and Fonterra's Anchor milk which has started supplying to North Island stores. 2 August 2018 New Zealand Herald Photograph by Dean Purcell. HBG 04Aug18 - Before moving to a2 Milk, Jayne Hrdlicka was seen as a contender for the top job at Qantas. PHOTO/DEAN PURCELL NZH 04Aug18 - A2 Milk and Fonterra are selling jointly branded A1-free milk in NZ. NZH 12Jun19 - A2 was the day's biggest gainer, up 3.2 per cent at $14.65. Photo / NZME NZH 17Jul19 - A2 Milk fell 0.9 per cent to $16.40. NZH 31Jul19 -

He pointed to a big slide in Bellamy’s business starting from last year mostly due to troubles in China, where it had yet to receive a tick of approval by Beijing to sell Chinese labeled products in mother and baby stores. Bellamy’s has lost market share to rivals The a2 Milk Company and to Aptamil in the last financial year.

“With Bellamy’s, Mengniu will expand quickly into the infant food sector and make more progress in the Australia cross-border e-commerce business,” the analyst said.

Mr Liang added that given Bellamy’s is still yet to be approved by Chinese regulators to sell its organic products due to new cross boarder e-commerce laws that kicked in from January, Mengniu’s offer will help to solve some of its problems. “It will help Bellamy to get its registration completed in a short time and to avoid related risks,” he said.


Infant formula market in China is valued at $US22 billion, and is one of the largest and fastest growing segments amongst all dairy segments in China driven by increasing disposable income.

Future growth will be underpinned by continuous premiumisation and increasing penetration into lower tier cities, which have larger households and higher birth rates.—edited from
Carrie LaFrenz, Financial Review

Given The fact that Australia’s organic baby formula products are now still popular in China, Bellamy’s China strategies shall never change. But to proceed by merging with Mengniu is an arguable move, although very profitable for the stakeholders. After the M&A, Mengniu will have a completed circle of all sort of airy products, providing for all age groups and to gain further advantages to all its domestic and international competitors. 

Edited by Joreal Qian