Food brand owner and dairy products manufacturer Bega Cheese could soon be in the crosshairs of major shareholder Andrew Forrest after it told the market its earnings would be at the lower end of its earlier guidance and it would impair assets.
The company sells well-known Australian brands including Vegemite, Dare, Farmers Union, Yoplait and Daily Juice, and Dr Forrest’s private companies, including Tattarang, own over 11 per cent.
Bega on Tuesday said it had sold its Vegemite factory at Port Melbourne for $114.6m to Charter Hall and that further property asset sales were on the cards as it flagged an impairment of between $180m and $280m on its bulk segment.
The decline in Australian milk production has intensified competition for it, creating a hit to Bega’s bottom line profit.
Some say it’s a sign that Bega needs to get back to core business.
While private equity firms like Pacific Equity Partners and BGH Capital could be sharpening their pencils for work on an acquisition and a break-up, some believe that the buyout funds have better opportunities elsewhere.
When it comes to the dairy industry, Bega is a price taker. It is also exposed to the volatility of the agriculture industry and is competing against a growing number of private label products being developed.
Yet the group, which carries out much of the contract processing work for Kraft, has the best intellectual property for cheese manufacturing in the world and this is considered to be the jewel of the crown.
Bega’s market value is $1.04bn, the lowest since 2013, with shares closing at $3.40.
Elsewhere, as anticipated, TPG Capital and Pacific Equity Partners have purchased Mundipharma’s consumer healthcare brands for their pharmaceuticals business iNova.
TPG Capital bought into iNova last year in a deal that valued the business at slightly more than $2bn.
The German pharmacy company Mundipharma was thought to be considering asset sales last year after being fined for misleading advertising of opioids in the US.
Strong earnings potential exists through bringing iNova together with Mundipharma operations – a move straight out of the private equity playbook.
PEP and Carlyle bought the iNova business from US-based Valeant in 2017 for $US930m.
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