SYDNEY (Dow Jones) — Australian authorities approved the sale of one of the country’s biggest infant-formula makers to a Chinese buyer, but imposed certain conditions on the deal amid increased scrutiny of Chinese investment in the country.
The deal to sell Bellamy’s Australia Ltd. to China Mengniu Dairy Co. for about 1.5 billion Australian dollars (US$1 billion) comes as Chinese interest in Australian-produced baby products soars.
It still needs the support of Bellamy’s shareholders, who will vote on the plan on Dec. 5.
Foreign takeovers are a sensitive political matter in Australia, where nationalistic politicians vigorously oppose deals seen to threaten food and water security at a time of rising global demand. Investment from China is especially contested because many companies there are state owned.
Bellamy’s shares were trading nearly 2% higher on the day to A$13.20 by midday Friday, after the announcement was made.
Australian and New Zealand dairy products have a strong reputation in China, where consumers have distrusted domestic producers following the 2008 tainted-milk scandal. Infant formula in Australia is popular among Chinese tourists visiting the country, and Australian grocers have at times had to ration some products given the demand.
Australian Treasurer Josh Frydenberg said he concluded the Bellamy’s acquisition is not contrary to the national interest, agreeing with a recommendation from the Foreign Investment Review Board.
However, conditions imposed on the Bellamy’s deal include that a majority of the board of directors be Australian resident citizens and Bellamy’s keep its headquarters in Australia for at least ten years. The approval also requires an investment of at least A$12 million in establishing or improving infant milk formula processing facilities in the Australian state of Victoria.
Those conditions will ensure that Bellamy’s maintains its presence in Australia and that the company proceeds with the previously announced investment in the processing facilities, Mr. Frydenberg said in a statement. Bellamy’s is No. 4 by market share in the Australian infant milk formula market.
Australia’s conservative government “welcomes foreign investment where it is consistent with our national interest,” the treasurer said. “Without foreign capital and investment, Australia’s output, employment and standard of living would be lower.”