Bega Cheese to buy Lion Dairy for $534m

Executive chair Barry Irvin said the purchase would prove more manufacturing and distribution resources and benefit its supply chain.

Bega Cheese, which currently owns Tatura Milk and operates a factory at Strathmerton, will now also gain Lion's national manufacturing footprint of 13 sites.

Lion Dairy produces a number of big name fresh milk brands including Pura, Dare, Farmers Union, Big M, Masters, and Dairy Farmers.

“The acquisition delivers important industry consolidation and value creation with synergies across the entire supply chain. The expanded product range, manufacturing and distribution infrastructure and brand portfolio realises our ambition of creating a truly great Australian food company,” Mr Irvin said.

Japanese company Kirin owns Lion, and the latter has Australia's largest cold chain distribution network, which supplies convenience stores.

A previous $600 million bid to buy Lion by Chinese-based company Mengniu Dairy was knocked back by the Federal Government in November last year, while an offer by Canadian-based processor Saputo, which purchased Murray-Goulburn in 2018, was withdrawn last Friday.

The purchase is expected to be completed by the end of January, and will involve raising $401 million from a share sale to institutions and retail investors.

Bega currently sources milk from dairy farmers in Victoria and New South Wales, with the purchase of Lion now opening up supply from Western Australia, Tasmania, South Australia and south-east Queensland.

Bega has been increasingly diversifying in recent years, spending $460 million in January 2017 to buy most of Mondelez International’s Australia and New Zealand grocery and cheese business, including the iconic Vegemite brand, as well as purchasing Saputo's Koroit milk-drying facility in western Victoria for $250 million and buying a stake in Capilano Honey.

Shares in the company have stopped trading while it prepares the share sale.

They last traded at $5.06.