The $600 million takeover of Australian drinks company Lion by a Chinese firm has been blocked by Treasurer Josh Frydenberg on national security grounds.
Mengniu Dairy, which is 25 per cent owned by the Chinese government, had agreed to buy Lion from Japanese parent company Kirin last year.
Australia’s Foreign Investment Review Board cleared the deal in February but Mr Frydenberg has now stepped in to prevent it, as the political and trade war between the two nations stepped up.
Lion is behind several beer brands including James Squire and Tooheys, and milk brands including Farmers Union and Dairy Farmers.
The Treasurer told Daily Mail Australia that he decided not to approve the deal because he believed it would be ‘contrary to the national interest’.
But Chinese media insists there is no national security threat and the move is part of the political tensions between Australia and China.
Chinese news site The Global Times, a mouthpiece for the Communist Party government, wrote: ‘Banning a Chinese company from buying an Australian dairy brand doesn’t make much economic sense.
‘It would show that bilateral relations will continue on a downward spiral, with the Australian side willing to risk its global reputation in order to maintain a tough line against China in all aspects.’
Liu Qing of the China Institute of International Studies told the newspaper the move is a ‘provocation’ by Australia which will bring retaliation from China.
Lion said in a statement: ‘Lion notes that China Mengniu Dairy Company Limited has been awaiting the outcome of the Foreign Investment Review Board review of its proposed purchase of Lion Dairy & Drinks.
‘Given this approval is unlikely to be forthcoming at this time, Lion and Mengniu Dairy have mutually agreed to cease the current sale process.
‘We are disappointed with this outcome and will now consider pathways forward in relation to the Lion Dairy & Drinks business.’
The sale of Lion-Dairy would have advanced Kirin’s strategy of offloading underperforming assets.
Kirin said cancellation of the deal was ‘unfortunate’ but ‘the revival and restructuring of Lion-Dairy and Drinks are a top priority’.
Treasurer Josh Frydenberg said: ‘I have been advised that Lion Dairy & Drinks Pty Ltd and China Mengniu Dairy Company Ltd have mutually agreed to not proceed with the sale process.
‘This follows the communication of my preliminary view to Mengniu Dairy that the proposed acquisition would be contrary to the national interest.’
The canceled deal was the latest salvo in an ongoing tit-for-tat trade war between the nations which emerged in the wake of the coronavirus pandemic and Australia’s support for an inquiry into China’s role in spreading it.
Last week China launched an anti-dumping investigation into wines imported from Australia in a major threat to the $6billion industry.
The 12-month inquiry, which could lead to huge tariffs, will look into whether Australian winemakers ‘dumped’ cheap bottles into China to drown out local producers between 2015 and 2019.
But Trade Minister Simon Birmingham said he was ‘perplexed’ by the move because Australian wines in China are expensive, and only cheaper than New Zealand’s bottles.
The move came after China threatened ‘further action’ last month when Canberra cancelled its extradition treaty with Hong Kong and extended visas for its residents.
Thousands fear they could be unfairly arrested under China’s new national security law, but the policy only further inflamed tensions between Australia and the communist regime.
After Canberra led global calls for an inquiry into the origins of COVID-19, China retaliated by slapping an 80 per cent tariff on Australian barley, suspending beef imports and telling students and tourists not to travel Down Under, in an apparent attempt to damage the Australian economy.
In June, Scott Morrison said cyber-attacks by a state-based actors have increased dramatically in recent weeks and targeted ‘all levels of government’ as well as ‘critical infrastructure’.
Security chiefs said the hackers are using the so-called ‘spear-phishing’ method to steal sensitive login details by sending scam emails, and carrying out regular ‘reconnaissance’ to find weak points in Australia’s defences.
Intelligence sources said the attacker was China.