Bega Cheese is selling two of its Victorian facilities to help fund its acquisition of Vegemite and other Kraft products.
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The company announced it is selling its relatively new Derrimut infant formula canning plant in Melbourne and one of its spray milk powder dryers to long time nutritional formula customer, Mead Johnson.
The $200million deal strategically bolsters the company’s balance sheet as Bega finalises its $460million deal to buy Mondelez’ Australian grocery business, including spreads such as Vegemite.
The sale of the nutritional formula finishing plant and the spray dryer at Tatura in northern Victoria has been accompanied by a 10-year service agreement with Mead Johnson, ensuring Bega will have access to product from the sites to supply its own customers.
The Derrimut plant was commissioned in 2015 to take advantage of Bega’s booming sales of nutritional products to an expanding customer base.
It had previously been making infant formula on contract to the US pediatric nutrition company Mead Johnson, and other customers, for more than a decade.
This week’s deal was foreshadowed in January to help offset the cost of Bega’s buying the Kraft spread, salad dressing and cheese brands from Mondelez.
It is expected to be completed by the end of June.
“We are delighted to strengthen our relationship with one of our long-term customers,” said Bega Cheese executive chairman Barry Irvin.
“The sale of our dryer and finishing plant together with the ongoing relationship with Mead Johnson is strategically and financially important for Bega Cheese.
“It secures revenue streams from these assets and releases capital which we will use to fund our recent Mondelez purchase.
Chief executive officer, Paul van Heerwaarden, said Bega was proud Mead Johnson had recognised the quality of the farmer-owned company’s assets and its reputation for producing premium infant nutrition products.
“We’re excited to continue to work with them over the next 10 years.”
The 110-year-old Mead Johnson company develops, makes and markets more than 70 products in more than 50 markets worldwide.
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