Warrnambool Cheese and Butter Factory to acquire Lion-Dairy and Drinks for $107.3m

Australia-based dairy group Warrnambool Cheese and Butter Factory (WCB) will acquire the everyday cheese business (EDC Business) of Lion-Dairy and Drinks (Lion) for $107.3m (A$137.5m).

The company’s majority shares are owned by Canada’s largest dairy producer Saputo, which announced last month that it was on the lookout for more Australian acquisitions.

As a part of the deal, Warrnambool will assume ownership of Lion’s everyday cheese brands, including Coon, Mil Lel and Cracker Barrel, and will also take control of Lion’s cut and wrap facility in Victoria.

The company said in a statement that the final purchase price is inclusive of $106.5m, which is representative of the value of inventory net of a minimal amount of assumed liabilities.

The company is planning to close the transaction towards the beginning of May 2015, which is subject to the approval of WCB shareholders.

WCB said that Saputo, which holds 87.92% of the shares in the company, has voiced its support for the transaction, and has advised that it will vote its shares in its favour. The company is planning to organise a shareholder meeting in late April or early May to consider the deal.

The company stated that the transaction will enable it to increase its presence in the consumer branded everyday cheese products segment in Australia.

The EDC Business’ operations, which includes cutting and wrapping, distribution, sales and marketing and intellectual property, generates annual sales of approximately $160m, and employs around 170 people.

Reuters quoted Lion Dairy and Drinks’ managing director Peter West as saying: "We are focusing resources behind our biggest growth opportunities, which are in higher-value categories such as milk based beverages, speciality cheese and yoghurt."