King Island Dairy specialty cheeses could be sold by parent Lion Dairy and Drinks to giant Saputo

The states’s dairy industry is in for a shake up with Canadian giant Saputo raising a $280 million bid for some of Tasmania’s biggest cheese assets.

SAPUTO’s $280 million bid to buy Lion Dairy and Drinks cheese assets should see it become a real force in the state’s dairy industry, Tasmanian Farmers and Grazier’s Association dairy council chairman Geoff Cox says.

“From an industry point of view it is a positive thing which will strengthen their position in Tasmania and provide good competition to rival Fonterra,” Mr Cox said.

The mayors of Burnie and King Island are also backing the Canadian giant’s bid.

The deal includes specialty cheese brands King Island Dairy, Tasmanian Heritage, South Cape, Mersey Valley, Heidi Farm and Australian Gold.

Lion’s cheesemaking plant at Burnie and another manufacturing plant and two dairy farms on King Island are also part of the deal.

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Combined, the two plants employ 400 people and the speciality cheese business generated revenues of about $192 million in the 12 months to the end of December, 2018.

“We are yet to learn if all milk contracts will be honoured and if the existing workforce will be kept or expanded” Mr Cox said.

“But on the face of it the deal should see Saputo become a real force in the industry.”

Lion chief executive Stuart Irvine said Saputo was ideally positioned to drive the business forward, given its dairy capabilities, complementary portfolio and commitment to the domestic cheese category.

The sale agreement is subject to approvals from the Australian Competition and Consumer Commission and the Foreign Investment Review Board.

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If the regulators approve the deal and other standard closing conditions are met, the sale will proceed in the second half of 2019.

Lion Dairy and Drinks still has its milk beverages, yoghurt and cream assets to sell, including Pura, Dairy Farmer, Big M and Dare milk brands, Yoplait, Fruche and Bornhoffen yoghurt brands and Divine Classic and Yogo dairy dessert lines.

Mr Irvine said there had been significant bidder interest in the whole of the LDD business and the specialty cheese assets on a stand-alone basis.

Lion said that during the past month it assessed the fair value of the LDD business, given dry conditions had impacted on the cost and availability of milk.

Saputo has also just bought the Dairy Crest Group in Britain for $1.8 billion.

Lion’s alcohol businesses in Australia and New Zealand and its Global Markets unit, are not affected by the dairy and drinks sale process.

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