Update on the sale of Lion Dairy & Drinks
On Friday 26 April 2019 Lion CEO Stuart Irvine provided an update on the sale of Lion Dairy & Drinks (LDD), including confirmation that Kirin and Lion have reached an agreement to sell the Lion Specialty Cheese Business to Saputo Dairy Australia (Saputo) on a standalone basis. The sale agreement is subject to ACCC and Foreign Investment Review Board approvals, and other standard closing conditions. Whilst it is not possible to be definitive, our expectation is that the sale is likely to complete in the second half of the 2019 calendar year.
In a further update, Lion CEO Stuart Irvine said that the sale process for the broader Lion Dairy & Drinks (LDD) business was continuing.
“When we announced the decision to progress a sale of the Dairy & Drinks business last year, we made clear our intention to identify the best future ownership arrangements for the Dairy & Drinks business, and to ensure both Dairy & Drinks and the Lion business are ideally positioned for growth – with the right people, assets and investment behind their respective strategies,” said Irvine.
“As we worked through the sale process over the last several months, significant bidder interest emerged in both the whole Dairy & Drinks business and also in the specialty cheese assets on a standalone basis. After a careful assessment of all options, Lion has entered into an agreement to sell the Dairy & Drinks Specialty Cheese business to Saputo. Saputo is ideally positioned to drive the business forward, given its deep dairy capabilities, complementary portfolio and commitment to the cheese category domestically.”
The sale to Saputo will include all of Dairy & Drinks’ specialty cheese brands, including King Island Dairy, Tasmanian Heritage, South Cape, Mersey Valley, Heidi Farm and Australian Gold, as well as cheese manufacturing assets at Burnie (The Heritage) and King Island (King Island Dairy and Cheese Store), and the two Lion-owned farms on King Island (Horizon Glen and Kyeema).
The sale agreement is subject to ACCC and Foreign Investment Review Board approvals and other standard closing conditions and is expected to complete within the second half of calendar year 2019.
In April 2019 Kirin and Lion assessed the fair value of the Dairy & Drinks business. The recent impact of extreme weather on the cost and availability of milk, combined with discussions with bidders to date in the sale process, have led Lion and its parent Kirin to take the step of recognising a non-cash write down of the carrying value of Dairy & Drinks, including the cheese business.
Lion’s non-cash write down of AUD 530 million does not impact the future underlying performance of the Dairy & Drinks business, which continues to benefit from a highly attractive portfolio of market-leading brands in growing categories – including milk-based beverages, yoghurt and premium juice.
“We are continuing to consider various pathways forward for the balance of the Dairy & Drinks business and will take the time to ensure we achieve the best possible outcome over the coming period,” Irvine concluded.
Lion has been advised by Deutsche Bank as financial adviser, with King & Wood Mallesons as legal adviser. Greenhill & Co Australia have acted as independent financial adviser to Lion.
Lion’s alcohol businesses in Australia and New Zealand, and its Global Markets business unit, are not affected by the Dairy & Drinks sale process.