The Australian Competition & Consumer Commission (ACCC) today (20 October) invited interested parties to submit their views, disclosing Saputo “proposes to acquire” Lion Dairy & Drinks from Japan’s Kirin Holdings.
Approached by just-food, Saputo said it was thinking about placing tabling a bid for the business, home to brands including Dairy Farmers and Pura.
“Saputo is consulting with the ACCC as part of its process in considering making an offer for the LDD [Lion Dairy & Drinks] business,” the company said. It declined to comment on why it is interested in buying the asset.
Kirin reportedly restarted its bid to offload Lion Dairy & Drinks last month after a move to sell the business to China Mengniu Dairy Co. hit the buffers.
In August, the two companies agreed to scrap a deal they had agreed in November. The proposed transaction had been given the green light by Australia’s competition regulator in February. However, amid increasingly strained relations between China and Australia, Kirin said in late August approval from Australia’s Foreign Investment Review Board was “unlikely to be forthcoming at this time”.
In September last year, Saputo acquired Lion’s speciality cheese assets, including brands such as Tasmanian Heritage and Mersey Valley, from Kirin after securing the approval of the ACCC.
Saputo is one of Australia’s largest dairy businesses, which the company has built steadily through organic growth and M&A. In 2018, the company bought Australian dairy major Murray Goulburn, a deal cleared by the ACCC after Saputo agreed to sell a milk-powder plant in the country. In 2014, Saputo also acquired a majority stake in Australia’s Warrnambool Cheese and Butter Factory, now owning 100% of the business.
During the year to 31 March, Saputo generated revenues of CAD2.35bn (US$1.79bn) in Australia, compared to CAD2.3bn a year earlier.
When Mengniu announced its deal to buy Lion Dairy & Drinks last November, the Chinese group said the Australian business also distributed products into south-east Asia and China, with a focus on yogurt.
just-food has approached Saputo for comment on the disclosure by the ACCC of its proposed move to buy Lion Dairy & Drinks.
According to The Australian Financial Review, Australian food manufacturer Bega Cheese is also understood to have tabled an offer. just-food could not reach Bega Cheese out of office hours. Bega Cheese indicated in August it could be interested in buying Lion Dairy & Drinks.
Michael van Aelst, an equity analyst covering Saputo for Canada’s TD Securities, said he believed it was possible the ACCC would approve a takeover of Lion Dairy & Drinks by the company, should a deal be struck.
“We would view a potential transaction as a positive development for both Saputo and the industry. It would allow Saputo to maximise its capacity utilisation and optimise its sourcing of milk, and would likely help move the industry to be more rational,” van Aelst said. “Despite Saputo’s leading Australian market share, we would believe ACCC approval would still be plausible.”