Japanese beverage manufacturer Kirin Holdings has had to scrap plans to sell its Australia-based dairy firm, Lion Dairy & Drinks, to China’s Mengniu Dairy for $430m after Canberra blocked the deal.

This is the first time the Australian government has intervened in a foreign takeover since bringing in emergency measures in March 2020 owing to coronavirus. These measures allow any foreign takeover proposals to be subject to up to six months of scrutiny.


The sale of Lion Dairy & Drinks – which produces milk, juice and alcohol brands including Big M, Daily Juice, and XXXX Gold – to Chinese buyers fell through after opposition from the Australian treasurer, Josh Frydenberg.

In a statement on August 25, Mr Frydenberg said that he had communicated to Mengniu Dairy that “the proposed acquisition would be contrary to the national interest”.  

This announcement marked a U-turn after an original approval of the deal by the Australian Competition and Consumer Commission on February 21 2020, but it was yet to get approval from the Foreign Investment Review Board (FIRB), an advisory group to the treasury.  

“Given this approval [by the FIRB] has not been secured to date, and is unlikely to be forthcoming at this time, regrettably, the parties have agreed to terminate the agreement,” Kirin Holdings said in a statement on August 25.

The blocking of the deal underpins diplomatic and trade tensions between Australia and China. Mengniu Dairy's largest shareholder is China’s state-owned food processing company COFCO Group. 

“Whilst we hope that the FIRB decision is not purely based on country of origin, what one considers most significant is that Lion Dairy is already foreign owned,” says Chris Rosario, an Australia-based partner at global law firm Squire Patton Boggs, who recently appeared in fDi’s mini-series on rising investment protectionism.

In November 2019, the FIRB had approved Mengniu Dairy's acquisition of infant formula producer Bellamy's Australia for AUD1.43bn ($1.03bn). Despite this, Chinese investment into Australia declined by 58.4% in 2019 compared with a year earlier, according to a report published by KPMG and the University of Sydney.

More broadly, increased scrutiny of FDI and blows to investor confidence caused by the global pandemic have put significant downward pressure on the global mergers and acquisitions (M&A) market. 

In the first half of 2020, there were 24% less cross-border M&A deals than a year earlier, according to a report published by law firm Allen & Overy that cites Refinitiv data.

The latest data from greenfield investment monitor fDi Markets also indicates a 40% year-on-year fall in greenfield FDI project announcements globally in the first half of 2020.