Acquisition of Koroit facility in Western Victoria: Bega Cheese Ltd.’s (ASX: BGA) stock moved up by 3.7% on July 18, 2018 after the company agreed to buy a dairy processing facility at Koroit in Victoria state from Saputo Inc’s local arm for A$250 million. The acquisition price includes the average inventory, which will be fully funded by new and existing bank debt facilities. The Koroit Facility has a processing capacity of approximately 300ML of milk into bulk and retail butter, commodity and retail milk powders. BGA and Saputo Dairy Australia (SDA) have signed a Transition Services Agreement and a Milk Supply Guarantee Agreement under which SDA is required to guarantee supply of 300ML of milk per annum until 30th June 2020. However, the transaction is subject to ACCC approval. Moreover, the acquisition of the Koroit Facility will provide BGA a significant presence in Western Victoria, support the continued growth of the core dairy business and will cater to the company’s domestic and export customers with an expanded range of products. Additionally, this acquisition is expected to generate an annualised EBITDA of $20m assuming the current annual intake of 300ML. After acquisition, the Koroit Facility will be integrated into Bega Cheese broader network of milk processing facilities, which may take until FY21 to complete the integration. Meanwhile, BGA stock has risen 17.20% in three months as on July 17, 2018 and is trading at a P/E of 8.39x.
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