Bega Cheese buys Vegemite, some Kraft brands from Mondelez

UPDATE: VEGEMITE is now back in Australian hands after Bega Cheese bought it, ending 90 years of US ownership.

Historic transaction: Bega Cheese has brought Vegemite back into Australian hands for the first time in 90 years.

UPDATE: VEGEMITE is now back in Australian hands after 90 years of US ownership.

Bega Cheese announced this morning it had acquired most of Mondelez International’s Australian and New Zealand grocery and cheese business — including Vegemite, Bonox, Kraft peanut butter, Kraft sliced cheese and Zoosh salad dressings — for $460 million.

Barry Irvin

Bega executive chairman Barry Irvin said it was a historic day for the dairy company.

“This (Mondelez) is a food manufacturing company with iconic brands in Vegemite and some great opportunities into the future,” Mr Irvin said.

“We are expanding by acquiring a business that has strong, reliable cash flow from a stack of brands, such as Vegemite, but also opportunities to grow in peanut butter and salad dressings.

“And, of course, there is something within this business that is also at the core of our business, which is cheese.

“Bega Cheese and Vegemite are a natural fit.”

Up until now, Bega Cheese had been a dairy company.

The purchase of the brands from Mondelez is a foray into non-dairy products.

“Bega Cheese has been saying for quite a while there are opportunities beyond dairy,” Mr Irvin said.

He said Vegemite was a mature brand, with sales still growing in the past year.

But there were opportunities to move Vegemite beyond being a breakfast product into one eaten at other times of the day.

“But we probably see better growth opportunities with the other brands,” he said.

READ MORE: BEGA BRINGS VEGEMITE HOME IN $460M DEAL

Mondelez International was born out of a 2012 split of the Kraft Foods company into separate snack food and grocery food businesses.

Kraft kept most of the grocery products while Mondelez took the snack food brands, such as Cadbury, Oreo, Ritz and Toblerone, although it did have a manufacturing licence for Vegemite, Kraft peanut butter and cheese slices and Philadelphia cream cheese in Australia.

The Weekly Times understands discussions between Bega Cheese and Mondelez International over the purchase of the Vegemite and Kraft brands had been going on for about a year but had intensified six months ago.

Mondelez is believed to be willing to sell Vegemite, Zoosh and the Kraft brands because it wanted to concentrate on its snacking products with a global focus.

“They don’t want local brands,” a source said.

“They want worldwide brands.”

Notably, the deal excluded the Philadelphia cream cheese brand, considered to be a global brand and the product of one of Kraft’s earliest acquisitions, the Phenix Cheese company in 1928.

Mr Irvin said manufacture of Kraft-branded products, such as peanut butter and cheese slices, was under a licence that expired at the end of December, after which they would revert back to The Kraft Heinz Company.

It is not clear what will happen to the Kraft peanut butter and sliced cheese branded products after December.

The source said Bega and not had any discussions with Kraft about those products.

Mr Irvin said the deal would be funded by a $500 million debt facility by the company’s existing lenders.

He said Bega expected the acquisitions would generate about $310 million in revenue and earnings before interest, tax, depreciation and amortisation of between $40 million and $45 million in its first year.

Currently, Bega has revenue of $1.2 billion from its existing dairy operations.

Mr Irvin said the company intended to maintain a strong balance sheet and had “near-term corporate opportunities under way to reduce debt”.

He said if this was unsuccessful, a capital raising might be considered in the future.

Mr Irvin said the deal was expected to take effect “in the early part of this calendar year” after going through a complicated transition period.

He said there were more than 200 people who would be brought into the business from Mondelez, including sales, marketing, research and development and manufacturing staff.

“We think they will bring a different set of skills to our business,” he said.

The sharemarket viewed the deal as positive, with Bega Cheese’s share price rising to a high of $5.09 today from the overnight price of $4.84.

It has now settled down to $5.03, a rise of 3.9 per cent.