Bellamy’s shares have surged by more than 50 per cent after the infant formula maker announced it had entered into a $1.5 billion takeover scheme with the China Mengniu Dairy Company.
The ASX-listed infant formula maker on Monday urged shareholders to back a scheme worth $13.25 cash per share, which represents a 59 per cent premium to last week’s closing price of $8.32.
The market opened a short time later and Bellamy’s shares shot up by 56 per cent to a near 14-month high $12.98 in early trade.
Mengniu’s approach came after Bellamy’s – a one-time market darling – faced mounting challenges from regulatory delays as China cracked down on imports.
Mengniu chief executive Jeffrey Lu Minfang said Bellamy’s organic brand position, local operation and supply chain were critical to the bid.
“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.”
China Mengniu Dairy will buy Bellamy’s Australia for A$1.5 billion ($1 billion), offering a 59% premium for the infant formula-maker.
— Bloomberg (@business) September 16, 2019
Bellamy’s shares were last worth $13.25 in July 2018, with the price eroding over the past 12 months as delays in Chinese regulatory approval hit sales of infant formula.
The shares were worth as much as $11.96 in April after Bellamy’s secured three Chinese approvals for its non-organic branded formula, but the company is still waiting on backing from China’s State Administration for Market Regulations to sell organic formula.
The delays weighed on Bellamy’s full-year results last month, with full-year profit halved and a medium-term revenue target pushed out past FY21.
Bellamy’s chief executive Andrew Cohen admitted the regulatory environment had been challenging over the past couple of years but denied the Mengniu takeover would fast-track the SAMR process.
“I don’t think this owner would change the likelihood of achieving this licence or when it would be achieved,” Mr Cohen said on Monday.
“I will point out that many [companies] are awaiting their licences… including Chinese businesses.”
A2 Milk was the first Australian producer to achieve the equivalent of SAMR registration in September 2017 – a development that preceded a near tripling of the company’s share price to a record high of $17.30 in July.
A2 Milk shares were 4.43 per cent higher at $13.66 at 11am (AEST) on Monday.
Fellow ASX infant formula companies Bubs and Wattle Health have sought to boost their chances of SAMR registration this year by purchasing Chinese-approved processing and packing facilities, though both are still to get the final nod.
Mr Cohen also said Mengniu was “an ideal partner for [the] business” and offered “a strong platform for distribution and success in China, and a foundation for growth in the organic dairy and food industry in Australia”.
The bid comprises $12.65 in cash per share from Mengniu and a fully franked 60 cent special dividend paid by Bellamy’s prior to implementation of the scheme.
Bellamy’s deputy chair John Murphy said the board unanimously concluded the scheme was is in the best interests of shareholders.
The takeover would be subject to approvals including by the Foreign Investment Review Board and relevant courts.
“We’re in the process with FIRB, we’re feeling very positive, but we don’t want to get ahead of the process,” Mr Murphy said.
Shares in Bellamy’s were still worth $12.94 at 1035 AEST, an increase of $4.62 or 55.59 per cent on Friday’s close.
Mengniu announced in July it was offloading its 51 per cent stake in dairy manufacturing unit Shijiazhuang Junlebao Dairy Co for 4.01 billion yuan ($A850 million) in a bid to refocus on its core businesses and the expansion of premium dairy products.