Cheesemaker Bega seals $460m perfect pairing with Vegemite deal

BEGA Cheese chairman Barry Irvin says the addition of Vegemite to its food stable will produce a more robust company that can better ride out the ups and downs of the dairy sector.

Mondelez Australia chief Amanda Banfield and Bega Cheese chief Barry Irvin.

BEGA Cheese chairman Barry Irvin says the addition of Vegemite to its food stable will produce a more robust company that can better ride out the ups and downs of the dairy sector.

Shares in Bega notched their biggest one-day rally to date yesterday after the group announced it was buying the spread and a suite of other food brands from the local arm of US-based snackfood titan Mondelez International.

The $460 million deal means Vegemite will return to Australian ownership for the first time in more than 80 years.

It also hands Bega the Bonox brand and Zoosh mayonnaise and sauces brands and a 6.3 hectare factory at Port Melbourne.

Mr Irvin said the deal was a natural evolution for Bega, which has laboured under a global milk glut and a downturn in Chinese demand for baby formula over the past year.

“We are a very sophisticated food manufacturer — so is Mondelez and the site at Port Melbourne is an extraordinarily good site,” he told Business Daily.

“On the manufacturing side we complement each other. On the marketing side our skills are enhanced by the addition of the team from Mondelez.

“It’s a natural evolution for the business as we move from more commodity-style products to more branded products.”

Mondelez Australia chief Amanda Banfield and Bega Cheese chief Barry Irvin. Picture: Stuart McEvoy

Shares in Bega closed 15.2 per cent higher yesterday at $5.16 after the deal was announced — the stock’s biggest one-day gain since it listed in mid-2011.

Bega will continue to produce various Kraft products under licence including peanut butter, nut spreads and processed cheese slices until the end of the year.

It will then launch several of its own branded products in some of those categories.

Mondelez, which is focusing on its core snack range, including Cadbury chocolate and Oreo biscuits, was spun out of Kraft in 2012.

Bega generated $1.2 billion in revenue in the year to June.

The Mondelez acquisition will kick in another $310 million in revenue and between $40 million to $45 million in earnings before interest, tax, depreciation and amortisation in its first full-year of operation.

The deal is expected to be bedded down by June.

“We are strengthening our business,” Mr Irvin said.

“Dairy can be volatile. Adding other elements to the business that provide strong revenues and strong cash flows help manage some of that volatility.”

Two hundred workers at the Port Melbourne site will join the Bega workforce. Mr Irvin said there were no plans to reduce worker numbers or sell the factory.

“This is a high quality facility and we think we will add to it,” he said.

Bega will fund the deal by drawing down on its existing loan and Mr Irvin said the group was open to further acquisitions down the track.

Entrepreneur Dick Smith, who produces his own OzEmite brand, said the return of Vegemite to Australian ownership was the best news he had heard in years.

Mr Smith said he had tried buying Vegemite from Kraft a decade ago with the idea of listing the product in its own right on the stock exchange.

“It’s fantastic,” Mr Smith said. “I’m now waiting for the announcement that Arnott’s Biscuits and Aeroplane Jelly are coming home.”

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