January 23, 2017

Australia’s most iconic food spread, Vegemite, will once again be Australian-owned following Bega Cheese’s recent announcement that it will acquire the majority of Mondelēz International’s Australian and New Zealand grocery and cheese business.

Since announcing the A$460 million deal and entering into the A$700 million market for bread and toast spreads, shares in Bega Cheese have surged 15 percent to A$5.16. The jump in share prices is welcome news for the company following its 52-week share price low in late 2016 due to unexpectedly low sales of its infant formula product on the Asian market.

The deal, which will initially be funded by bank debt with near-term corporate opportunities to pay down debt, adds further diversification to Bega Cheese’s large B2B dairy foods and nutritional businesses, and places the company in an unrivaled position in the spreads category.

As an iconic Australian brand, Vegemite is found in close to 90 percent of the nation’s households with more than 300,000 jars produced each day. Other Kraft branded products included in the deal are peanut butter, processed cheese slices, and mayonnaise (but not Philadelphia spreads), alongside the brands Bonox and ZoOsh, the second leading brand in salad dressings.

Mondelēz International’s Australian and New Zealand grocery and cheese business controls 31 per cent of the A$500 million spreads category in Australia, with Vegemite being the leading spread, which claims a 14 percent share over the category, and an 89 percent share of the yeast sub-segment. The spreads category has grown at a five percent CAGR since 2013, and is forecast to be driven by consumer interest in healthier nut spreads and honey.

Bega Cheese Executive Chairman Barry Irvin said the acquisition was an exciting evolution for the company and will be value accretive in its own right, strategically important, and company-making.

“The iconic brands alongside the Bega brand are strong building blocks to enable Bega Cheese to become a great consumer goods business,” Irvin said. “The wonderful heritage and values that Vegemite represents and its importance to Australian culture make its combination with Bega Cheese truly exciting.”

“In addition to Vegemite and the other brands being undeniably iconic, the people we are taking on are very impressive and will play an important role in growing the merged business,” added Irvin.

The leading Australian cheese company expects the new business to generate pro-forma net revenues of approximately A$310 million and EBIDTA of between $40 and $45 million in its first full year of operation, which is expected to be strongly EPS accretive.

According to the Vice President Australia, New Zealand, and Japan for Mondelēz International, Amanda Banfield, the deal enables the global food giant to focus on driving profitable growth by investing in its core snacks categories and power brands including Cadbury Dairy Milk chocolate and Oreo biscuits.

The Mondelēz Port Melbourne manufacturing site will transfer to Bega Cheese as part of the agreement and approximately 200 colleagues who concentrate their time working in this division of the business will be offered roles on comparable terms.

The transaction is expected to close in the coming months.

–Melissa Lawrence