Bellamy’s Australia has entered into a $1.5 billion takeover scheme with the China Mengniu Dairy Company.
The giant Chinese dairy manufacturer has an indirect interest in Gippsland-based dairy processor Burra Foods and was reportedly in the hunt for Murray Goulburn when it was sold last year.
Mengniu is one of China’s biggest dairy companies.
It is listed on the Hong Kong stock exchange, with a market capitalisation of $HKD121.32 billion ($A22.6 billion).
Bellamy’s announced on Monday it had entered into a scheme for Mengniu to acquire 100 per cent of the company at $12.65 per share, with a special dividend of a further $0.60 per share to be paid before the takeover.
The total $13.25 per share is a 59 per cent premium on Friday’s $8.32 closing share price and a 54pc premium on the $8.59 three-month average share price.
Bellamy’s chair John Ho said the board unanimously backed the proposal, with the takeover expected to be completed by the end of the year.
The board is urging shareholders to approve the deal, which is also subject to approval by the Foreign Investment Review Board.
«We believe this offer crystalises the value of the Bellamy’s business as you see it today,» he said.
Bellamy’s chief executive officer Andrew Cohen said Mengniu was an ideal partner for the 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,» he said.
«This transaction can further deliver on our founder’s original vision of a truly iconic Australian brand and ‘A Pure Start to Life’ for the world.
«Our employees, our trade partners and local organic manufacturers will continue to grow and thrive with the success of our business.»
Mengniu’s chief executive officer Jeffrey Minfang Lu said Bellamy’s was a leading Australian organic brand and its supply-chain was critical to Mengniu.
«Our sales growth ambitions for Bellamy’s in Australia, and the broader Asia Pacific region, will see investment in the local dairy industry to ensure the required capacity is in place to achieve these plans,» he said.
The takeover deal comes less than three weeks after Bellamy’s announced a fall in its full-year profit for 2018-19 to $21.7 million.
It blamed the fall on lower birth rates in China, regulatory changes and increased competition.
The company has been waiting for approval from the State Administration for Market Regulation for Chinese-labelled organic products made in its Victorian facility to be sold in retail outlets.
Bellamy’s organic products in China currently have English language labels and are sold via e-commerce or imported by daigous, Chinese who buy product directly in Australia and ship it back via the post or couriers.
Mr Cohen said this deal would be unlikely to change the likelihood of achieving the licence.
«But we actually remain confident that licence would be achieved,» he said.
«I would note that there are many people waiting for their licences, including many significant Chinese businesses both abroad and in Australia.»
The achievement of the licence had been factored into the valuation of the company.
Bellamy’s deputy chair John Murphy played a key role in the deal.
He said it was in the absence of a superior offer and subject to an independent valuation.
«As a board we considered all options; we weren’t up for a sale process, we virtually were approached,» he said.
«We believe this offer is compelling, it gives shareholders the opportunity to realise the value in the investment in full in cash.»
The deal is a major milestone for the company, which has been rebuilding since a major upheaval in 2016-17, which saw its then chief executive Laura McBain and chairman Rob Woolley sidelined, as the independent directors took control of the company.
«We are proud of the transformation program the management team with support from the board has executed since the significant challenges of early 2017,» Mr Murphy said.
He said he was positive about gaining approval from FIRB.
«At this stage we’re in the process with FIRB,» he said.
«We’re having full engagement and are co-operating in that process.
«It has a way to run, but we’re feeling very positive.
«We don’t want to get ahead of that process, we’ll let it play through but at this stage we’re feeling very positive that it will run a course.»