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Sale of everday cheese business in line with turnaround strategy

Lion Dairy & Drinks (LDD) today announced an agreement to sell its everyday cheese business to Warrnambool Cheese and Butter (WCB) for $137.5m on a cash free, debt free basis, subject to final adjustments at closing.

2 March 2015: Lion Dairy & Drinks (LDD) today announced an agreement to sell its everyday cheese business to Warrnambool Cheese and Butter (WCB) for $137.5m on a cash free, debt free basis, subject to final adjustments at closing.

The sale is subject to WCB shareholder approval.  WCB has announced that its Directors intend to recommend that its shareholders vote in favour, and that Saputo (which owns 87.92% of WCB) is supportive of the transaction and advised WCB that it will vote in favour.   The transaction is expected to be completed towards the beginning of May 2015.

Under the terms of the sale, WCB will assume ownership of Lion’s everyday cheese brands, which include Coon, Mil Lel and Cracker Barrel, and will also take control of Lion’s cut and wrap facility which is located adjacent to WCB’s site at Allansford, Victoria.  LDD currently manages cut and wrap for both businesses, while WCB manufactures cheddar for LDD.

Appropriate arrangements will be put in place to ensure a seamless transition, with no disruption to supply for customers and consumers, and no impact on dairy farmers.  WCB has indicated that it will run the cut and wrap facility as a going concern, and intends to retain all staff while looking to grow the business in line with its strategy.

Peter West, Managing Director of LDD, said “Under our stewardship, Coon, Mil Lel and Cracker Barrel have grown to become much-loved family staples, and our everyday cheese business continues to perform very well in the market.

“Our decision to sell is part of our broader three-year strategy to turnaround performance at LDD and drive sustainable profit growth.  We are focusing resources behind our biggest growth opportunities, which are in higher-value categories such as milk based beverages, speciality cheese and yoghurt.

“Warrnambool Cheese and Butter is ideally placed – with the right assets, business profile and manufacturing footprint – to take over ownership of Australia’s leading everyday cheese business.  LDD is delighted that this agreement secures jobs at the Allansford cut and wrap site, and ensures these iconic cheese brands can continue to be enjoyed by families into the future.

“We believe this deal appropriately values the business and delivers a win/win for all stakeholders – including our people, the Allansford community, local farmers, customers and consumers.  The proceeds of the sale will be invested behind our turnaround strategy.” Mr West concluded.

Lion was advised on the transaction by Greenhill and King & Wood Mallesons.