Vegemite is Australian again after Bega Cheese buys Kraft brands for $460 million

A Vegemite factory in Melbourne. Graham Denholm/Getty Images

Bega Cheese is bringing Vegemite home after buying it and the Australian and New Zealand arm of US-based global food giant Mondelez International.

The $460 million deal to acquire the MDLZ grocery business includes Vegemite, Bonox and ZoOsh salad dressings. The right to produce Kraft-branded products locally under licence, from processed cheese to peanut butter and mayonnaise, are part of the sale, but Philadelphia cheese products are not included.

Bega says the Kraft licence will be royalty free until December 2017 as part of transitional arrangements.

The company will also produce the Dairylea and Snackabout brands under licence in Australia and New Zealand.

Bega will have the global trademark rights to Vegemite and ZoOsh.

The 6.3Ha Port Melbourne site, where 300,000 jars of Vegemite are produced daily, and there are five automated production lines, are part of the sale.

In an announcement this morning to the ASX, the NSW diary company, which has been making some processed cheese products for Kraft for the past eight years, said it would fund the acquisition from bank debt.

Bega said the local Kraft business is expected to have net revenues of $310 million with an EBITDA of $40-45 million expected in its first full year, excluding transaction and implementation costs.

The company plans to rationalise its own product range to align with the new Kraft products.

Executive chairman Barry Irvin said bringing such iconic brands into the company would “enable Bega Cheese to become a great consumer goods business.”

“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,” he said.

MDLZ has 31% of the $550 million spreads category in Australia.

“This acquisition will be value accretive in its own right, strategically important and company making,” Irvin said.

Bega plans to use “near-term corporate opportunities to pay down debt”.

It expects the deal to be finalised in the first half of CY2017.

A short time ago, Bega Cheese shares were up 11% to $4.98.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at