After much speculation, Bega Cheese has confirmed it has won the battle for Lion Dairy & Drinks business in Australia and will acquire the operations from current owner Kirin Holdings in Japan for AUD534m (US$393.2m).
Bega, one of Australia’s major dairy suppliers and home to the Vegemite spreads brand, said today (26 November) it has entered a “binding share sale and purchase agreement” for Lion Dairy & Drinks, which owns the Pura and Dairy Farmers milk brands. The deal is expected to close at the end of January.
Publicly-listed Bega had been vying for the business amid reported interest from investment firm Tanarra Capital, while Canadian dairy giant Saputo had reportedly previously withdrawn from the race.
Bega said it will fund the acquisition with new and existing debt facilities, along with the proceeds from a AUD401m share placement. The share offer has been priced at AUD4.60.
Chairman Barry Irvin said: “We are delighted to announce this acquisition which we believe will create significant value for shareholders. The acquisition delivers important industry consolidation and value creation with synergies across the entire supply chain. The expanded product range, manufacturing and distribution infrastructure and brand portfolio realises our ambition of creating a truly great Australian food company.”
Lion Dairy & Drinks’ portfolio also consists of yogurt under the Farmers Union and Dairy Farmers brands, cream and custard, and chilled juices.
It has 13 manufacturing plants across Australia and also has an agreement to produce, market and sell yogurt and dairy desserts under the Yoplait brand in Australia and in some parts of South-east Asia under license.
Lion Dairy & Drinks also has a joint-venture agreement with Vita International Holdings – Vitasoy Australia Products – which manufactures plant-based products under the Vitasoy brand.
Bega and Lion Dairy & Drinks already work together, with a joint venture, Capitol Chilled Foods (Australia), that manufactures and markets dairy products in The Australian Capital Territory.
For Kirin, the sale will leave the company to focus on the beverage-alcohol business in Oceania. Kirin reportedly restarted efforts to offload Lion Dairy & Drinks in September after a move to sell the business to China Mengniu Dairy Co. hit the buffers earlier this year. Kirin and Mengniu agreed to scrap a deal they had agreed for Lion & Dairy Drinks last November. The proposed transaction had been given the green light by Australia’s competition regulator in February. However, amid increasingly strained relations between China and Australia, Kirin said in late August approval from Australia’s Foreign Investment Review Board was “unlikely to be forthcoming at this time”.
Kirin launched a review of the business in autumn 2018, confirming that October it was looking to sell the asset. However, the following April, a deal for Lion Dairy & Drinks cheese unit was announced, with Saputo agreeing to buy brands including South Cape and King Island Dairy.
The Japanese group, which has been looking to streamline its overseas operations, first entered Australia’s dairy sector in 2007 through the acquisition of local manufacturer National Foods for AUD2.8bn (then US$2.6bn).
A year later, the company moved to buy another Australian dairy business, Dairy Farmers, for AUD910m (then US$773.9m).
In 2009, Kirin snapped up Australian beverage business Lion Nathan and subsequently merged the new assets with National Foods. Two years later, Kirin renamed the overall Australian arm Lion.
In 2015, Saputo acquired Lion’s “everyday” cheese business for AUD137.5m (then US$107.1m), taking control of the Coon, Cracker Barrel, Mil Lel and Fred Walker brands. Lion retained what it termed “speciality” cheese brands before selling them to Saputo last year.