Japanese beverage company Kirin Holdings and China Mengniu Dairy have terminated the deal involving the acquisition of Lion-Dairy and Drinks by the Chinese firm.

In a company statement, Kirin said that the two companies have agreed to terminate the A$600m ($430m) transfer deal due to apprehensions that the deal would not be approved by the Foreign Investment Review Board (FIRB).

Last week, The Australian Financial Review (AFR) reported that the Australian Government may block China Mengniu Dairy’s acquisition of Lion Dairy & Drinks, due to ‘diplomatic issues’.

Diplomatic relations between the two countries have deteriorated after Australia urged for an independent investigation into the origins of Covid-19.

In addition, tensions between the two countries arose after the Chinese Government launched an anti-dumping investigation into wine imports from Australia.

Last November, Mengniu Dairy signed an agreement with Kirin Holdings and Lion to acquire the latter’s Dairy & Drinks business in Australia.

Under the agreement, Mengniu Dairy agreed to acquire white milk, milk-based beverages, juice, yoghurt and water ice brands and assets.