Bega Cheese to buy Lion Dairy for $534m

Bega Cheese is buying the company behind Masters milk and Big M from Japanese alcohol giant Kirin, returning the iconic brands to Australian ownership.

Japanese media reported the Lion Dairy and Drinks acquisition was done days ago, saying the price was more than 40 billion yen ($530 million), and speculation mounted when Bega Cheese went into a trading halt pending a capital raising.

The purchase was confirmed on Thursday, with the net cost totalling $534 million.

The deal also adds Yoplait yoghurt, Pura Milk, Farmers Union, Dairy Farmers, Juice Brothers, Daily Juice and Dare brands to Bega Cheese’s already large product stable.

Kirin struck a deal in November to divest the subsidiary to China Mengniu Dairy, but it was shot down by Treasurer Josh Frydenberg amid increasing trade tensions between China and Australia.

Canadian company Saputo was among bidders for Lion Dairy but dropped out of the race, leaving Bega Cheese in pole position.

“We are delighted to announce this acquisition which ... delivers important industry consolidation and value creation with synergies across the entire supply chain,” Bega Cheese executive chairman Barry Irvin said.

“The expanded product range, manufacturing and distribution infrastructure and brand portfolio realises our ambition of creating a truly great Australian food company.”

Bega Cheese, which brought Vegemite back to Australian ownership in 2017, also gains the Vitasoy joint venture and expanded capacity to add cream and custard to its dairy portfolio.

“The sale will see Bega, as an established dairy and food company with more than 120 years of heritage, well placed to drive the business forward given its deep dairy capabilities and strong commitment to iconic Australian brands and the local dairy industry,” Lion chief executive Stuart Irvine said.

“The retained Lion business has a clear strategy to become a leading global, crafted adult drinks business.

“The completion of this sale will enable further investment behind our priority categories of core beer, craft beer and seltzer in both domestic and international markets.”

The deal marks Lion’s complete exit from the dairy business, having sold its specialty cheese business to Saputo for $280 million last year.

It retains XXXX, Tooheys, Hahn, James Boag, James Squire and Little Creatures.

To pay for the acquisition, Bega Cheese is doing a capital raising at $4.60 per share to raise around $400 million.

Shares in the company remain in a trading halt but last closed at $5.06.