Bega pays $534m for Lion's dairy brands and 13 sites

Bega pays $534m for Lion's national dairy brands, factories, cold stores


Bega Cheese has succeeded in its bid to buy the national dairy processing and cold chain distribution assets of Lion Dairy and Drinks.


Updated 2pm

Bega Cheese will pay $534 million for the national milk and dairy foods processing business of Japanese-owned Lion Dairy and Drinks, including Australia's largest cold chain distribution network.

The deal, confirmed today after a week of anticipation, is almost $70 million less than Chinese bidder Mengniu Dairy Company was going to pay earlier this year.

Mengnui, which also recently bought Bellamy's Organic, quit its year-long bid in August after Federal Treasurer Josh Frydenberg expressed foreign investment concerns about the deal.

Among the assets Bega gains are 13 processing sites around Australia, three national cold store distribution centres, and a host of big name national dairy product brands, led by Dairy Farmers milk.

Other popular brands in the Lion Dairy and Drinks stable include Pura and Masters white milk and cream lines; Dare, Big M, Classic and Farmers Union flavoured milks, and yoghurt market leaders Yoplait and Farmers Union.

The deal will lift Bega's current milk intake about 75 per cent to 1.7 billion litres a year, up from about 955m litres.

Its footprint will include new supplier territory in Victoria's Gippsland, Queensland, northern and Central West NSW, South Australia and Western Australia.

In the non-dairy category Lion also owns the top selling Daily Juice, Juice Brothers and Berri fruit juice brands, and the Zooper Dooper freezable ice block brand, which will all go to Bega, along with 68 suppliers in southern NSW and northern Victoria.

Making a great Aussie

Bega Cheese executive chairman Barry Irvin said dramatically expanding Bega's product manufacturing and distribution infrastructure and brand portfolio would realise the NSW South Coast based company's ambition of creating "a truly great Australian food company".

"The acquisition delivers important dairy industry consolidation and value creation synergies across the entire dairy supply chain," he said.

The deal is expected to be completed by February.


Bega will pay for a big portion of the purchase from Japan's Kirin Holdings with a $401m capital raising, issuing about 87m new shares, or equivalent to about 41pc of the company's ordinary shares now trading on the Australian Securities Exchange.

Institutional investors will be offered shares worth about $181m, while an entitlement offer to existing Bega shareholders will enable them to buy one new share for every 4.5 they already own, raising about $220m.

Share offer

The capital raising will be at an offer price of $4.60 a share, a 9.1 per cent discount on Bega's $5.06 share price when the company last traded on the ASX.

Bega shares will remain in a trading halt until the end of the week while the first stage of the capital raising is wrapped up.

"We're delighted to announce this acquisition," Mr Irvin said.

"We believe it will create significant value for shareholders."

The combined business is expected to generate revenue in excess of $3 billion a year.

Synergies achieved by combining the two big milk processors' milk networks and corporate structures are expected to achieve savings of $41m.

However, the deal will also incur extra acquisition expenses including stamp duty, transaction and separation costs of about $62m and costs relating to the capital raising.

Synergies, opportunities

Bega's chief executive officer Paul van Heerwaarden said fortunately a recent organisational restructure within the company would simplify the acquisition integration and take advantage of the various synergies and growth opportunities in domestic and international markets.

The company was very pleased with the success of other acquisitions it had made in recent years.

These include the $460m purchase of the big Kraft Foods business in Australia and New Zealand in 2017 and the 2018 takeover of the former Murray Goulburn milk plant at Koroit for $250m.

Lion's CEO Stuart Irvine said his company's dairy and drinks business was transferring to an experienced player with more than 120 years of dairy and food industry heritage.

Bega was well placed to drive the business forward given its deep dairy capabilities and strong commitment to iconic Australian brands and the local dairy industry.


Apart from its mainstream domestic dairy brands, Lion Dairy and Drinks also has a joint venture stake in plant based beverage manufacturer Vitasoy Australia and an alliance with French dairy co-operative group Sodima.

Sodima outsources the manufacture and marketing of its famous Yoplait yoghurt brand to Lion for distribution in the local market and parts of South East Asia.

The merger will also bring together, under one parent, the ownership of Canberra Milk and the Capitol Chilled Foods business, formed in the 1996 with Lion's predecessor the Dairy Farmers co-operative, which held a 75pc stake in the joint venture.

Capitol Chilled Foods has a processing plant and 12 distribution sites.

The Bega Cheese bosses said the Lion acquisition would bring significant advantages to its branded foods portfolio including broadening its dairy and consumer goods range with a highly complementary product line up and supply chain.

The expanded dairy product capability into yoghurt, custard, fresh cream and flavoured milk would add a lot of strength to the company's core dairy footprint.

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