Saputo has agreed to sell the Koroit plant in Australia to local firm Bega Cheese for around CAD244m (US$184.3m) as part of a condition entered into with competition authorities when the Canadian dairy business acquired Murray Goulburn.

The milk-powder plant in Victoria was owned by dairy processor Murray Goulburn until Saputo snapped up its operating assets and operating liabilities, including milk supply commitments, for US$1bn, a deal that was finalised in May.

Competition watchdog, The Australian Competition and Consumer Commission (ACCC), still needs to approve the plant sale, which is expected to close in the second quarter of fiscal 2019. 

The Koroit factory has around 110 employees and generates approximately CAD234m in annual revenues. 

According to a statement from Bega Cheese, the facility processes 300-ml of milk into “bulk and retail butter”, commodity and retail milk powders and milk powder for youngsters.

As part of the deal to sell the plant, Saputo has entered into a “transaction services agreement” and a “milk supply guarantee agreement” to supply 300-ml of milk per annum until 30 June 2020. The ACCC also needs to sign off on that agreement.

Bega Cheese said it expects the Koroit plant to generate an “annualised” EBITDA of AUD20m (US$14.7m) based on the current 300-ml of milk, adding that it sees “potential upside” for increased milk intake including its own milk collections in the region.

The Australian firm cautioned that it may take until fiscal 2021 to fully integrate the Koroit facility into its own milk-processing operations.

Paul van Heerwaarden, Bega Cheese’s chief executive, said: “The Koroit facility will provide us with a significant presence in western Victoria and operational flexibility with our milk-processing sites. Importantly, the acquisition will support the continued growth of our core dairy business and provide domestic and export customers with an expanded range of products.”