UPDATE 1-Australia’s Bega Cheese plans $400 mln buyout of Kirin dairy arm – source

(Adds shares)

SYDNEY, Nov 23 (Reuters) – Top Australian cheesemaker Bega Cheese Ltd is planning to buy the local dairy arm of Japan’s Kirin Holdings Co Ltd, a person with knowledge of the situation told Reuters, potentially accelerating its transformation into a food giant.

Bega was conducting due diligence on Kirin’s Lion Dairy & Drinks with a view to buying but there was no guarantee of a deal eventuating, the person said, noting the price would likely be about A$550 million ($402.05 million).

The cheesemaker, which earlier put its shares in a trading halt citing “a material announcement about a proposed acquisition”, declined to comment on Monday. Lion representatives in Australia did not immediately respond to requests for comment. The person was not authorised to comment publicly on the deal and so declined to be identified.

The deal would take the 121-year-old former dairy cooperative closer to a goal of becoming what it has called a “great Australian food company” with iconic Australian grocery brands. Lion has about 6% of the fragmented Australian dairy market, said industry researcher IBISWorld, with household milk brands like Pura and Dairy Farmers.

In 2017, Bega, based in a coastal town of the same name 420km (261 miles) from Sydney, bought most of Mondelez International Inc’s brands in Australia and New Zealand for A$460 million, returning the famed condiment Vegemite and Kraft peanut butter to local ownership. [bit.ly/3nNnffX ]

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For Kirin, a sale would relieve the Japanese alcoholic drinks giant of an asset it has been trying to offload since 2018 as part of a broader push to divest underperforming overseas assets and move into health and cosmetics.

Kirin was forced in August to scrap an earlier attempt to sell the asset to Chinese food conglomerate China Mengniu Dairy Co Ltd for A$600 million after the Australian government blocked the sale amid broader geopolitical tension.

Shares of Bega are up 13% since February, when fears of COVID-19 sent global equities into turmoil, against a broader Australian market decline of 9%, as investors favour stocks seen to benefit from working and entertaining from home.

Kirin shares were up 0.5% on Monday, in a slightly weaker overall Tokyo market. ($1 = 1.3680 Australian dollars) (Reporting by Byron Kaye; Editing by Christopher Cushing)

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