Bega Cheese, already owning the famous Vegemite brand, has acquired Lion’s milk and beverages business for $ 560 million to add milk and juice, and yogurt brands Dairy Farmers, Pura, Farmers Union, Daily Juice, Big M and Yoplait to his stall.
The acquisition will more than double Bega Cheese’s total sales to approximately $ 3 billion, but CEO Barry Irvin said Thursday the juice portion of the business could be dumped because it isn’t core heard and fighting for good returns.
Paul van Heerwaarden, CEO of Bega, left, and Barry Irvin, chairman, say the deal is a huge step forward for the company. Morgan Hancock
But the overall acquisition was a critical building block in making Bega a truly great Australian food company, with the Lion operations grossing $ 1. 6 billion in sales and 56 million dollars in profit.
A $ 401 million raise in capital at a cost of $ 4. 60 will pay for a large part of the transaction. Bega Cheese has been on a trading freeze since Monday.
Lion, who also runs a large beer business with brands like XXXX Gold, Tooheys, and West End, is owned by Japanese giant Kirin. It was forced back into a new sale process in August after Treasurer Josh Frydenberg blocked the sale of $ 600 million to China Mengniu Dairy because it was against the national interest. .
The proposed transaction fell victim to the strained diplomatic relations between China and Australia and public fear of Chinese acquisitions in Australia.
Mr. Irvin said Bega was lucky enough to have the Lion business back on the market because Bega was just going through a cost-saving and business improvement program and was ready to strike.
Lion’s Dairy and Beverage division also includes Australia’s only national cold chain distribution network, delivering the products to retail outlets and other outlets. Lion’s milk and beverage business has 13 manufacturing facilities.
Bega entered Lion’s « Black Box » data room last weekend in the final phase of the sales process and beat Canadian dairy giant Saputo and a consortium led by Tanarra Capital to gain access to the internal workflows of Lion dairy products and beverages.
Mr. Irvin said the company will act quickly to generate $ 41 million in synergy. USD once the deal closes in January.
The portion of the white milk business that was a “foundation” of the cold chain network that Bega would inherit would be a strong focus for synergies and streamlining, he said.
The juice operations were not a burning platform, but required a lot of work. « I wouldn’t call the juice the core, » said Irvin, signaling that asset sales were likely.
He said Bega Cheese has always had great ambitions to build a large Australian food company. « Timing can be important in these things, » he said.
The deal increases the company’s milk intake to 1. 7 billion liters per year, out of 955 million liters.
Bega Cheese diversified in 2017 by purchasing the iconic Vegemite brand and a handful of other products for $ 460 million from global food giant Mondelez International.
The $ 401 million raise in capital includes a one-on-four $ 220 million raise. 5 proportionately accelerated, non-cancellable entitlement offer and an institutional placement of 181 million. USD.
The fully signed deal is $ 4. 60 a stock that represents a 9. 1 percent discount on Bega’s last degree.
Stuart Irvine, Lion CEO, said the sale would result in the business being transferred to a seasoned player. He said the price was $ 560 million gross.
« With the sale, Bega, an established dairy and food company with more than 120 years of tradition, will be able to drive the business forward as it has extensive dairy expertise and is deeply committed to cult Australian brands and the local dairy industry. » Mr Irvine said.
Evans and Partners analyst Phil Kimber said the net purchase price of $ 534 million was equivalent to a gross selling price of $ 560 million, minus a $ 26 million after-tax deduction for IT separation costs. Mr Kimber said the flavored milk and yogurt stores are the jewels in the crown of Lion dairy products and beverages, with juice being a « tough category ». .
Paul van Heerwarden, CEO of Bega Cheese, said the group did not underestimate the challenges ahead, but the company is in a prime position after going through its own cost improvement program.
The integration would be a complex task. « It has a lot of moving parts, » he said.
Bega focused on expansion and took a foray into the breakfast food market in 2019.
The milk processor and food manufacturer acquired a minority stake in Hummingbird Superfoods in September 2019 after acquiring a majority stake in the online nutritional supplement business 180 Nutrition.
Hummingbird sells on-the-go breakfast foods such as ready-made « blends » and pre-cooked porridge on a subscription basis to timeless consumers.
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Bega cheese, Lion Dairy & drinks, Lion, Kirin Holdings Company, Dairy Farmers Pty Ltd
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