Bega snaps up Lion Dairy and Drinks for $560m

Lion Dairy & Drinks employees Emily de Jager and Mick Mourant. Picture: Tricia Watkinson

Bega Cheese has announced Thursday morning that it has acquired the Lion Dairy and Drinks business for a headline number of $560 million.

Stripping out certain deductions, it is understood that the price is $534m.

It comes as Bega receives overwhelming demand for its $400m equity raising which will be launched on Thursday to fund the acquisition.

Bega is working with Kidder Williams and Bell Potter, while UBS was recently drafted in to assist on the equity raising.

Bega, a $1bn listed dairy and food producer, launched a roadshow on Wednesday with a large number of meetings held with institutional investors.

The company has been in a trading halt this week in anticipation of the $400m equity raising.

As part of the equity raising, shares are being sold at $4.60 each, consisting of a $180m placement and a $220m entitlement offer.

Lion Dairy and Drinks has been owned by Japanese firm Kirin, which was advised by Deutsche, and the latest deal will not only see the business return to Australian hands, but aid the strategy of Barry Irvin to create a major local food company selling Australian-made products to consumers.

Last year, Bega teamed up with Japanese drinks giant Asahi to buy the Lion business, but it was instead sold to China’s Mengniu for $600m after Lion initially was hoping to secure more than $1bn for the assets on offer.

However, the Lion assets were placed back on the market after the transaction was blocked by the federal government due to foreign investment concerns.

This time around, Bega led the competition for the Lion assets, fending off competition from rival Saputo and John Wylie’s Tanarra Capital.

It was tipped as being strongly positioned to win the race by DataRoom on November 9.

The Lion Dairy assets include a cold storage distribution chain in service stations and corner stores, Berri fruit juices, Big M flavoured milk and fresh milk under the Pura name or house brand sales to supermarkets.

The price paid by Bega for the assets is a far cry from what Japan’s Kirin Holdings outlaid for the assets — first paying $2.9bn for the dairy and fruit producer National Foods in 2007, then $950m for Dairy Farmers the following year.