Amatil walks away from Lion drinks deal

Coca-Cola Amatil has withdrawn from negotiations to buy Lion Group's Dairy & Drinks division (LDD).

Amatil had teamed up with Freedom Foods to bid for LDD, with Amatil proposing to take the flavoured milk, juice and cheese businesses and Freedom the white milk and yoghurt businesses.

Amatil released a statement to the ASX saying it was not pursuing its bid and was "comfortable with, and remains focused on, its current outstanding portfolio of beverages".

The Australian reports there were possible "competition concerns" regarding the deal.

"The only live party believed to remain interested is China’s Mengniu Dairy, which is working with Macquarie Capital and Minter Ellison," The Australian said. 

"However, Saputo is believed to be an eager suitor for the speciality cheeses operation, while Parmalat, controlled by Lactalis, is also thought to be another suitor. Freedom Foods is also thought to be searching for a partner to potentially bid for the entire company after Coca Cola Amatil’s withdrawal."

Lion Group chairman Rod Eddington said the company was happy to retain ownership of LDD.

“We accept that the industry is in the process of consolidating," he told the 2019 Global Food Forum. "The question for us is should we sell into that consolidation process. It is ongoing. Finding a buyer is not an easy task.

“If we can’t find a buyer at the right price at this time we will continue to run the business. We have good patient shareholders in Kirin in Japan.

“The business is in a much better shape. We are happy to hold onto it."

Lion announced LDD was on the market in October 2018, with the proceeds to be used to finance the expansion of its craft beer and fine wine business internationally.

Lion CEO, Stuart Irvine said: “Following careful consideration, we believe a sale of LDD is the best option to set both Lion and LDD up with the capital and resources needed to grow into the future.

"It’s clear from the further work done in recent weeks that LDD’s strategy to more fully leverage growing consumer wellness trends will require new capabilities and capital investment. The sale process will focus on finding the right owner to take LDD forward and unlock its full potential.

"The remaining Lion business has a number of avenues for growth available and the decision to sell LDD will realise the capital needed to accelerate investment behind these."

“Our Lion Global Markets (LGM) business has made great progress with Little Creatures now available in 30 global cities, the acquisition of the Fourpure craft beer brand in the UK and continued growth in our fine wine business in North America. We intend to back LGM to explore further opportunities in high growth craft beer markets world-wide.” 

Lion has not revealed how LDD failing to sell will impact on its craft beer expansion plans.