Bega Cheese will pay $534million for the national milk and dairy foods processing business of Japanese-owned Lion Dairy and Drinks, including Australia's largest cold chain distribution network.
The deal, confirmed on Thursday after a week of anticipation, is almost $70million less than Chinese bidder Mengniu Dairy Company was going to pay earlier this year.
Mengnui, which also recently bought Bellamy's Organic, quit its year-long bid in August after Federal Treasurer Josh Frydenberg expressed foreign investment concerns about the deal.
Among the assets Bega gains are 13 processing and cold store sites around Australia and a host of big name nation dairy product brands, led by Dairy Farmers milk.
Other popular brands in the Lion Dairy and Drinks stable include Pura and Masters white milk and cream lines; Dare, Big M, Classic and Farmers Union flavoured milks, and Yoplait and Farmers Union yoghurt.
In the non-dairy category Lion also owns the Daily Juice, Juice Brothers and Berri fruit juice and the Zooper Dooper freezable ice block brand.
Making a great Aussie
Bega Cheese's executive chairman Barry Irvin said dramatically expanding Bega's product manufacturing and distribution infrastructure and brand portfolio would realise the NSW South Coast based company's ambition of creating "a truly great Australian food company".
"The acquisition delivers important dairy industry consolidation and value creation synergies across the entire dairy supply chain," he said.
The deal is expected to be completed by February.
Bega will pay for a big portion of the purchase from Japan's Kirin Holdings with a $401m capital raising, issuing about 87m new shares, or equivalent to about 41pc of the company's existing ordinary shares trading on the Australian Securities Exchange.
Institutional investors will be offered shares worth about $181m, while an entitlement offer to existing Bega shareholders will enable them to buy one new share for every 4.5 they already own, raising about $220m.
The capital raising will be at an offer price of $4.60 a share, a 9.1 per cent discount on Bega's $5.06 share price when the company last traded on the ASX.
Bega shares will remain in a trading halt until the end of the week while the first stage of the capital raising is wrapped up.
"We're delighted to announce this acquisition," Mr Irvin said.
"We believe it will create significant value for shareholders."
The combined business is expected to generate revenue in excess of $3 billion a year.
Synergies achieved by combining the two big milk processors' milk networks are expected to achieve savings of $41m, including a corporate reorganisation.