Dairying started in the Bega Valley in the 1850’s. In those days each farmer produced and sold products, such as cheese and butter from their dairy. After a period of time, local farmers decided to improve their individual production and marketing activities and banded together to establish The Bega Cooperative Creamery Company in 1899. Bega’s original factory was opened in Bega in 1900. From 2007 to date, Bega acquired the cheese assets of Kraft Foods, purchased the assets and operations of De Cicco Industries, and created a wholly owned subsidiary– Tatura Milk Industries. In August 2011, Bega was listed on the Australia Securities Exchange (ASX). In July 2017, Bega expanded its portfolio beyond dairy to include some of Australia’s most iconic and loved food brands and products, including Vegemite, ZoOSh, and Bega Peanut Butter. Today, with sites from Bega to Melbourne and Northern Victoria, Bega now employs approximately 2,000 people. The company has evolved from its modest and localised co-operative heritage in Bega into a significant and innovative player in the Australian and international dairy industry. Bega’s original site at Lagoon Street still operates today, producing cheddar and mozzarella cheese and whey powders. There are now approximately 500 farms supplying the Bega group. The Company’s production of approximately 236,000 tonnes of dairy products equates to a sales turnover in excess of $1.2 billion per annum.

3. Bega’s recent acquisition:

Bega acquired Mondelez International’s Australian and New Zealand grocery businesses in 2017.

(a) What were the economic or strategic reasons behind the acquisition? Was it a good deal?

(b) How was the acquisition financed? Who were the target investors?

(c) Describe investors’ reaction to the acquisition deal as reflected by Bega’s share price: from the period before the announcement of the acquisition to the closure of the acquisition. Briefly discuss the reasons behind the stock price movements within that period.

800 words