The Bega Cheese Ltd (ASX:BGA) share price is in a trading halt while it undertakes a capital raising to fund the $534 million Lion Dairy & Drinks acquisition…
The post Bega Cheese (ASX:BGA) announces $534 million Lion Dairy & Drinks acquisition appeared first on Motley Fool Australia. –
The Bega Cheese Ltd (ASX: BGA) share price remains in a trading halt on Thursday whilst it undertakes a capital raising to fund a major new acquisition.
What did Bega Cheese announce?
This morning Bega Cheese announced the launch of a $401 million underwritten entitlement offer and placement to fund the acquisition of Lion Dairy & Drinks for $534 million.
According to the release, this will comprise a 1 for 4.5 pro-rata accelerated non-renounceable entitlement offer of approximately $220 million and an institutional placement of approximately $181 million.
These funds will be raised at an offer price of $4.60 and through the issue of approximately 87 million new shares. This offer price represents a 9.1% discount to its last close price.
What is Lion Dairy & Drinks?
Lion Dairy & Drinks’ core business is the manufacture, marketing, sales and distribution of:
- Milk Based Beverages (Dare, Farmers Union, Big M, Masters, Dairy Farmers)
- Yoghurt (Yoplait, Farmers Union, Dairy Farmers)
- Chilled Juices (Juice Brothers, Daily Juice)
- Cream and Custard (Pura, Dairy Farmers)
- White Milk (Pura, Dairy Farmers, Masters).
Lion Dairy & Drinks also has Australia’s largest national cold chain distribution network supplying food service and convenience stores and a national manufacturing footprint comprising 13 sites.
Management expects the acquisition to create significant value for shareholders.
Bega Cheese’s Executive Chairman, Barry Irvin, commented: “We are delighted to announce this acquisition which we believe will create significant value for shareholders. The acquisition delivers important industry consolidation and value creation with synergies across the entire supply chain. The expanded product range, manufacturing and distribution infrastructure and brand portfolio realises our ambition of creating a truly great Australian food company.”
The combined business is expected to generate revenue in excess of $3 billion.
Lion Dairy & Drinks delivered pro forma normalised EBITDA of $56 million (post-AASB 16) excluding synergies for the 12 months to 30 September.
Base case synergies of $41 million per annum are expected. This is primarily from milk network optimisation, indirect procurement, and a corporate reorganisation.
All in all, the deal is expected to be double digit earnings per share accretion in FY 2022.
Bega Cheese’s Chief Executive Officer, Paul van Heerwaarden, concluded: “We are very pleased with the performance of acquisitions made in recent years which are achieving or exceeding our profit targets. The recent company restructure and ERP implementation will allow us to integrate this Acquisition and take advantage of the various synergies and growth opportunities across domestic and international markets.”
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
- Is the Harvey Norman (ASX:HVN) share price good value?
- Don’t waste the stock market crash! I’d use Warren Buffett’s strategy to profit from it
- Will Netflix stock crash in 2021?
- Citadel (ASX:CGL) share price flat as scrip offer approved
- Gentrack (ASX:GTK) share price slips following mixed full-year results
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.