BEGA CHEESE has purchased Saputo’s Koroit factory for $250 million.
Saputo will supply 300 million litres of milk each year until June 30, 2020, under the deal.
The transaction is subject to Australian Competition and Consumer Commission (ACCC) approval. The ACCC would only permit Saputo to purchase Murray Goulburn if it sold Koroit.
The Koroit facility currently processes about 300 m litres of milk into bulk and retail butter, commodity and retail milk powders and baby formula.
Bega CEO Paul van Heerwaarden said the Koroit facility would provide Bega with "a significant presence in Western Victoria and operational flexibility with our other milk processing sites".
He said it would enable Bega to provide an expanded range of products for the domestic and export market.
Bega Executive Chairman Barry Irvin said Bega has been collecting milk in western Victoria for almost 10 years.
"The opportunity to acquire such significant and quality infrastructure will cement our presence in one of the strongest dairy regions in Australia.
"As always, we will look to work closely with dairy farmers to grow supply to the Koroit facility."
Mr Irvin expects the Koroit facility to generate an annual EBITDA of $20 m assuming the current annual intake of 300 m litres.
He said there is potential upside from increased milk intake including milk Bega already collects in the region.
The Koroit facility will be integrated into Bega’s broad network of milk processing facilities.
Roma Britnell, Victorian MP for South West Coast, said the purchase was "good news for Koroit, for the south-west dairy industry and the entire region".
"Bega is a great Australian company that is going through significant growth and has become a major player in the Australian dairy industry. The company having a greater presence in the country’s largest dairy producing region makes perfect sense.”