The announcement today to the Australian Securities Exchange confirmed a report in The Standard earlier this month that Bega Cheese was set to be the new owner.

Bega Cheese said it would buy the Korit factory from the current owner, Canadian dairy giant Saputo, for $250 million including average inventory.

The purchase will be fully funded by new and existing bank debt facilities.

As part of the sale, Bega Cheese is guaranteed the plant’s current milk supply of 300 million litres until June 30, 2020.

The purchase is subject to approval from the Australian Competition and Consumer Commission.

The Koroit factory produces bulk and retail butter, commodity and retail milk powders and growing up milk powder. 

Bega Cheese chief executive officer Paul van Heerwaarden said the Koroit plant would provide Bega with “a significant presence in western Victoria and operational flexibility with our other milk processing sites.

“Importantly the acquisition will support the continued growth of our core dairy business and provide domestic and export customers with an expanded range of products,” Mr van Heerwaarden said.

He said the factory’s 108 employees would be taken on by Bega Cheese.

Bega Cheese’s executive chairman Barry Irvin said Bega Cheese had 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,” Mr Irvin said.

“As always, we will look to work closely with dairy farmers to grow supply to the Koroit Facility.

“This is another important step in creating an Australian owned dairy and food company that is competitive and efficient in Australia and the world,” he said.

Bega Cheese said it expected the Koroit factory to generate annualised Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $20 million assuming the current annual intake of 300 million litres.

Saputo said the Koroit plant currently generated about $240 million in annual revenues.

Bega said there was potential for increased milk intake at the factory.

The plant had a processing capacity of one billion litres and was MG’s biggest processing plant before it was hit hard by an exodus of suppliers after MG slashed its milk price in early 2016.

Saputo was forced to hive the Koroit plant away from the other seven plants it acquired from MG because the ACCC believed it would have too much control of the regional milk market if it owned both the Koroit plant and its other south-west dairy processing plant at Warrnambool Cheese and Butter.

Bega Cheese said the Koroit plant would be integrated into Bega Cheese’s broader network of milk processing facilities but cautioned that it might take until 2020-2021 to fully integrate it into the company.