Freedom Foods Group has struck a "binding agreement" to buy Australian oat-based cereal and snacks business Popina Foods.
In August, Freedom indicated it was nearing a deal to acquire an oats business but did not identify the target. However, yesterday (21 October), Freedom revealed it was set to snap up Popina, which it described as a "recognised leader in cluster-format cereals and snacks in Australia".
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Freedom said it would pay A$35m for the business, subject to closing conditions. Popina generates annual revenue of A$50m and is "profitable", Freedom said. More than a quarter of Popina's sales come from brands including Arnold's Farm and Goodness Superfoods. The majority of its revenue comes from third-party brands and from retailers in Australia and Asia.
The acquisition was announced alongside plans by Freedom to raise A$65m through offering shares in the business. Part of the proceeds from the offer will be used to pay for the Popina acquisition.
In a presentation to investors, Freedom said the purchase would position it as "a leading Australian-owned cereal and cereal snacks manufacturer, with dual manufacturing capability in both allergen-free and broad nut-based capabilities".
It added: "Demand for oat-based cereal products – including cluster, granolas and related snacks – is expected to grow, reflecting increasing consumer awareness of the health benefits of oats, improved product format and growing demand for oat-based cereals in Asian markets."
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By GlobalDataFreedom sells UHT products in China and the funds from the share offer will also be used for a new UHT processing facility in Ingleburn in Sydney. The site is set to increase Freedom's capacity in "value-added" dairy products and non-dairy lines. Warehousing is scheduled to be set up by next June, with processing following a year later.
Meanwhile, the company said it had sold part of its stake in A2 Milk Co., the New Zealand-based firm. Freedom has reduced its shareholding in A2 Milk from 17.8% to 10.4%.
This summer, A2 Milk rebuffed joint takeover interest from Freedom and US dairy group Dean Foods. Announcing the reduction in its stake, Freedom said its "current intention" was to keep "a strategic stake" in A2 Milk, while providing production support and milk supply.
