Bega Cheese Acquires Lion Dairy & Drinks
Bega Cheese Limited (“Bega Cheese”, “BGA”) is pleased to announce that it has entered into a binding Share Sale and Purchase Agreement to acquire all of the shares in Lion Dairy & Drinks (“LD&D”, “Company”) for a net acquisition price of $534 million1 (“Acquisition”). Completion of the Acquisition is anticipated to occur at the end of January 20212.
![Photo by Nikolai Chernichenko on Unsplash](https://img.chemie.de/Portal/News/149754_0HQiEFETwJ.jpg?tr=n-xzoom)
Photo by Nikolai Chernichenko on Unsplash
The Acquisition will be funded by a combination of new and extended debt facilities and the proceeds from a $401 million underwritten entitlement offer and placement.
Commenting on the Acquisition, Bega Cheese’s Executive Chairman, Barry Irvin, said “we are delighted to announce this acquisition which we believe will create significant value for shareholders. 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.”
LD&D’s core business is the manufacture, marketing, sales and distribution of:
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Milk Based Beverages (Dare, Farmers Union, Big M, Masters, Dairy Farmers);
Yoghurt (Yoplait, Farmers Union, Dairy Farmers);
Chilled Juices (Juice Brothers, Daily Juice);
Cream and Custard (Pura, Dairy Farmers); and
White Milk (Pura, Dairy Farmers, Masters).
Significantly, LD&D also has Australia’s largest national cold chain distribution network supplying food service and convenience stores. The Company has a national manufacturing footprint comprising 13 sites.
The Company also has significant joint ventures and alliances with:
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Sodima, through a licence to manufacture, market and sell yoghurt and dairy desserts under the Yoplait brand in Australia and in some South East Asian markets;
Vita International Holdings, through the joint venture company Vitasoy Australia Products Pty Ltd which manufactures, markets and sells plant-based products under the Vitasoy brand; and
LD&D also has a longstanding joint venture with Bega Cheese, in relation to Capitol Chilled Foods (Australia) (“CCFA”), an ACT company that manufactures dairy products in the ACT and distributes and sells those and other products under the LD&D brands and Canberra Milk brand.
Financial Overview
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The combined business is expected to generate revenue in excess of $3 billion3
LD&D delivered pro forma normalised LTM Sep-20 EBITDA4 of $56 million (post-AASB 16) excluding synergies
Base case synergies of $41 million per annum primarily from milk network optimisation, indirect procurement and a corporate reorganisation
Double digit EPS accretion5 in FY226
Pro forma FY20 net debt of $518 million and net debt / EBITDA of 3.3x (3.1x pre-AASB 16)
Synergy generation and additional initiatives expected to support strong deleveraging post transaction. Bega remains committed to target leverage below 2.0x in the near to medium term
Compelling Strategic Rationale
The Acquisition expands and optimises Bega Cheese’s branded foods portfolio:
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creates a large-scale dairy and foods business with increased product portfolio;
builds a highly complementary consumer packaged goods supply chain and organisational capability;
significantly expands its domestic distribution network to include the route channel, through LD&D’s national cold chain distribution network; and
strengthens its core dairy footprint through:
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asizableincreaseinannualmilkintaketo1.7billionlitresfrom955millionlitres;
expanded product capability into new branded dairy categories such as Milk Based Beverages, Yoghurts and Culinary (Cream and Custard);
expanded manufacturing and milk collection footprint into new regions including the strategically important region of Gippsland; and
complementary supply profile provides opportunity to optimise utilisation of milk intake across a significantly expanded manufacturing footprint.
Bega Cheese’s Chief Executive Officer, Paul van Heerwaarden, said “we are very pleased with the performance of acquisitions made in recent years which are achieving or exceeding our profit targets. The recent company restructure and ERP implementation will allow us to integrate this Acquisition and take advantage of the various synergies and growth opportunities across domestic and international markets.”
Bega Cheese is advised by Kidder Williams Limited and Addisons Lawyers.
1 Net acquisition price represents gross sale price of $560 million less a $26 million deduction for IT separation costs (net of tax)
2 Adjustments to be made following completion in respect of various matters including debt and working capital
3 Assuming Bega FY20 revenue and LD&D LTM Sep-20 revenue of $1.6 billion
4 Represents post-AASB 16 pro forma normalised EBITDA, including Vitasoy JV: 49% of NPAT and a management fee, and 75% of CCFA earnings
5 Comparative EPS for the Company takes into account a theoretical ex-rights price adjustment for the entitlement offer and excludes one-off costs and any impact of acquisition accounting
6 FY22 includes synergies of $36m