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10 October, 2020

Australian buyers eyeing off Dairy Farmers.

Bega Cheese is rumoured to be a strong contender to buy Lion’s dairy and drink who are the owners of Dairy Farmers.

By Phil Brandel

Bega Cheese is rumoured to be a strong contender to buy Lion’s dairy and drinks business after Treasurer Josh Frydenberg blocked the sale to Chinas Mengniu Dairy Co.

China Mengniu Dairy Co withdrew from its $600 million bid for Lion Dairy & Drinks last month after the Treasurer signalled that he was not going to allow it to proceed.

Lion owns and distributes brands such as Dairy Farmers Milk, Big M, Pura, Master, and Dare flavoured milk and Berri Juice and Farmers Union and Yoplait yoghurt.

It’s believed that Bega has gone as far as to send proposals to accounting firms in recent weeks to help oversee its financial due diligence.

Bega’s executive chairman Barry Irvin said that Bega had long been interested in the potential appeal of Lion’s packaged milk, yoghurt and juice business to complement its own strengths in cheese, formula and milk powders.

Mr Irvin said Bega remained “open to further dairy consolidation opportunities” and argued that the company was in a strong position to capitalise on the growing demand for natural products.

Bega was founded in 1899 as a farmer co-operative in the Bega Valley and listed in 2011, and still calls itself “The Great Australian Food Company”..

In 2017, Bega finalised a $460 million deal with Mondelez International for its grocery and cheese business, giving it the licence to manufacture Kraft cheese and peanut butter as well as Vegemite.

Another starter in the race could be the farmer-owned Norco dairy co-operative which has also expressed interest in putting up a bid for at least part of the $600 million Lion Dairy and Drinks business.

Norco chief executive Michael Hampson agreed acquiring Lion's production and supply chain, stretching from Perth to North Queensland, could be "too big to do all by ourselves".

"However, we could work with Lion or another party," he said.

The Norco brand is the fastest growing milk brand in NSW and Queensland, lifting almost 40 per cent in 2019-20.

According to Millaa Millaa dairy farmer and Chairman of the Dairy Farmers co-op James Geraghty, there are other big hitters looking to snap up a Lion Dairy and Drinks.

“Bega are the most obvious contender, Norco doesn’t have the money and from what I understand Lion do not want to break the company up, they want to sell the business as a whole,” he said

“Andrew Twiggy Forrest has also expressed interest and he has very deep pockets and there’s also another group, Tanarra Capital who are a private equity firm who have a lot of respected investment bankers.”

“As a farmer, I would pick Bega, I would prefer Bega as they are already in the market and they already have a relationship with farmers.

“From what I’ve heard, Lion want a quick sale and that means no foreign investment board.”

Mr Geraghty does have a message for politicians while the deal is up in the air “I would like to see Jacqui Lambie and Pauline Hanson speak to the people that are involved in this and offer some support,” he said

“Seeing as they said Dairy Farmers should be Australian owned, they should be offering support of some description.

“I’ve left numerous messages for Pauline about this issue and but I’ve never received a callback.”




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