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Chinese investment in Australia faces litmus test with two new deals
- Beijing-backed Mengniu Dairy on Monday made an offer to buy Bellamy’s, Australia’s top maker of milk formula
- In the second deal, more than one Chinese party is expected to consider buying an engineering services business from Lendlease Group
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Australia’s coalition government will face its biggest test regarding investment from mainland China since its May re-election with at least two corporate buyouts likely to require approval from a regulatory body increasingly vigilant against security risks.
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Beijing-backed Mengniu Dairy on Monday offered US$13.25 per share to buy Bellamy’s, valuing the infant milk powder producer at A$1.5 billion (US$1.03 billion).
The deal has been recommended by Bellamy’s directors but still requires approval from the Foreign Investment Review Board (FIRB) overseen by Treasurer Josh Frydenberg.
Australia relies heavily on foreign investment. However, investment that from China fell 36 per cent last year to A$8.2 billion and is likely to fall further this year as capital controls remain tight and the Chinese economy slows, according to data from consultancy KPMG.
The FIRB has taken a harder line on foreign investment, particularly after the US raised security concerns over the involvement in telecommunications networks of Chinese giant Huawei.
The Bellamy’s deal should receive regulatory approval given the manufacturer is not classified as critical infrastructure, investment bankers said. One possible focus, they said, will likely concern Mengniu’s largest shareholder, the state-owned agribusiness COFCO, which owns 16.2 per cent.
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