(Yicai Global) Aug. 25 -- China Mengniu Dairy abandoned a planned buyout of Lion Dairy and Drinks after the AUD600 million (USD430 million) deal faced opposition from the Australian government.

Mengniu and Japan’s Kirin Holdings agreed to drop Mengniu’s acquisition of Kirin’s Australian unit Lion Dairy because they failed to obtain local regulatory approval, the Hohhot-based company said in a statement today. It needed approval from the Australian Foreign Investment Review Board.

Mengniu made the cash offer for Melbourne-based Lion Dairy in November.As recently as Aug. 20, Mengniu told Yicai Global that the deal was still on the cards, following a report in the Australian Financial Review that the government intended to block it.

Australian Treasurer Josh Frydenberg said in a statementthat the sale “would be contrary to the national interest," according to a report published today on the website of Australian broadcaster ABC.

Mengniu and Kirin have now killed the deal in writing. The aborted transaction will have no great negative impact on Mengniu’s operations, business and financial condition, it added.

Australia has tightened its grip on foreign investment since the start of the year. It announced temporary measures in late March to prevent overseas capital from stampeding in to buy up ailing firms during the Covid-19 pandemic. The FIRB reviews all foreign investment and has extended the appraisal period to six months.

China’s investment in the world’s smallest continent has been sliding in recent years. Its direct investment in Australia fell to USD6.2 billion in 2018 from USD10 billion in 2017. Merger and acquisition outlays by Chinese companies there fell 62 percent to USD2.4 billion last year, KPMG International Cooperativesaid in a report.

Shares of Mengniu [HKG: 2319] closed 0.7 percent lower today at HKD35.40 (USD4.47).

Editor: Ben Armour