Hot on the heels of posting a $230 million statutory loss for 2022-23, Bega Group has expanded its national dairy footprint, buying Tasfoods' Betta Milk and Meander Valley Dairy brands.
The $11m deal, which is subject to various regulatory approvals, will see the 65-year-old Tasmanian Betta Milk name added to Bega's portfolio, which includes the Dairy Farmers, Pura and Dare milk ranges.
TasFoods' Betta milk processing plant in Burnie and the Meander Valley Dairy site in Launceston, plus all and equipment and staff, will become part of the NSW-based Bega.
Bega will also pick up a royalty-free licence to use the Pyengana Dairy's milk and cream products in Australia, although TasFoods will continue to hold, and invest in, the Pyengana premium cheese business.
Bega's dairy and drinks division already owns a milk processing plant in the Lenah Valley on the edge of Hobart, acquired as part of its 2021 acquisition of the Lion dairy and drinks business.
The company said buying the TasFoods assets was consistent with its strategy to build its branded products portfolio and improve Bega Groups offer of "great local brands for Tasmanians".
Last week Bega Group announced a $230m non-cash after tax write-down of its assets, primarily related to the shrinking value of its bulk dairy commodity factories, which pushed last financial year's statutory profit into the red, although normalised profit after tax was $28.5m.
It blamed a growing "disconnect" between high Australian farmgate milk prices and plummeting internationally traded commodity markets as a key factor in the loss.
TasFoods has only owned Betta Milk since buying it from the Betta Milk Co-operative Society in 2019 for $11.5m, not long after buying Meander Valley Dairy.
In response to a strategic review the company - which will now be debt-free after the sale to Bega - decided its expertise and core capabilities would be better served if focused on its premium cheese and Nichols Poultry businesses.
Like its recent sale of the Shima Wasabi brand, the latest deal is part of TasFoods' plan to shave off unprofitable businesses in an attempt to reach profitability for the first time.
TasFoods will retain Betta Milk's land and buildings at Burnie, leasing the site back to Bega, and sub-leasing Meander Valley's Launceston site.
The sale deal closes a less than successful investment in milk for Tasfoods since it acquired Meander Valley Dairy from Robin and Karen Dournauf for $2.1m in September 2015.
Tasfoods chief executive officer, Scott Hadley, said the sale funds would be used to retire all of TasFoods term debt and to fund future growth opportunities.
"The sale of Betta Milk Dairy and Meander Valley Dairy businesses and the licensing of Pyengana Milk represents an important strategic step towards simplifying TasFoods and strengthening the company's balance sheet," he said.
The group embarked on a strategic review of its assets in March 2022, and soon after closed the short-lived organic poultry brand, Isle & Skye.
In June, it sold its Shima Wasabi unit to a local Tasmanian company.
"The transaction allows us to sharpen our focus on delivering organic growth across Nichols Poultry and Pyengana Cheese, while continuing to identify and evaluate strategic and financially compelling opportunities in adjacent, high-growth food and beverage sectors to create sustainable value for our shareholders," Mr Hadley said.
He said it was "pleasing" an iconic Australian dairy brand such as Bega Cheese had chosen to purchase the brands.
Bega chief executive officer, Pete Findlay, said his former dairy farmer co-op, turned national dairy, spreads and sauces business recognised the quality in Betta Milk, Meander Valley and Pyengana milk brands and was delighted to add them to its portfolio.
"Betta Milk is a fantastic regional brand that has been a household name in Tasmania for more than 65 years," he said.
"Acquiring these brands supports our ambitions to become a great Australian food company."
TasFoods' Mr Hadley was confident the Betta and Meander Valley business, its customers and employees would continue to thrive "under the custodianship of an equally proud, Australian-owned group in Bega".
News of the deal came as TasFoods reported an 11.8 per cent lift in operating revenue for the first half of the 2022-23 financial year, to $38.2m, but a net loss after tax of $3.8m.
The loss was an improvement on the $5.4m net loss delivered in the six months to December 2021.
Mr Hadley said the revenue performance was "particularly pleasing" in light of the market challenges the business has faced.
