Has Bega Cheese Limited just created an expensive mess?

The Bega Cheese Limited (ASX: BGA) share price lost 2% on Thursday’s trade to close at $7.59 after the company announced it no longer plans to buy dairy company Murray Goulburn.

The announcement comes as Bega attempts to deal with a sticky peanut butter dispute that’s being played out in a US court.

Bega was touted as a potential contender for the acquisition of Devondale Murray Goulburn, part of the MG Unit Trust (ASX: MGC), along with Canadian dairy Saputo, the A2 Milk Company Ltd (ASX: A2M), New Zealand dairy company Fonterra, a Chinese firm, and others.

But Bega Cheese Executive Chairman Barry Irvin said his company is no longer a potential purchaser of Murray Goulburn and has no current plans to raise capital.

“Bega Cheese continues to maintain a strong balance sheet and believes there are a number of potential opportunities in dairy and food,” Mr Irvin said.

In a separate announcement, Bega said it intends to fight claims that it has infringed intellectual property rights concerning its recently acquired peanut butter product.

In July, Bega Cheese completed its acquisition of Mondelez International’s Australia and New Zealand grocery and cheese business.

Mondelez assumed control of the peanut butter rights after Kraft Food Inc’s restructuring in 2012.

Bega’s acquisition of Mondelez included Vegemite and peanut butter, the associated intellectual property rights and the manufacturing facility at Port Melbourne where the products have been made for years, according to Bega.

But global food company Kraft-Heinz disagrees.

Kraft told a federal court in New York that Bega has misused its special peanut butter design, hence confusing consumers and damaging the value of its intellectual property.

As such, it appears the case, prima facie, will hinge on the terms of the agreement with Mondelez and Kraft and how that agreement relates to Bega’s recent acquisition.

Bega stated: “The only change has been the removal of the Kraft brand.”

But that could prove to be part of the problem.

Regardless, Bega says it’s not giving up on its new peanut butter product.

“Bega Cheese is assessing these proceedings but is confident of its legal rights in its peanut butter products and will vigorously enforce those rights,” Bega stated.

Still, it seems Bega’s peanut butter problem could turn out to be quite costly if the dispute leads to lengthy court proceedings.

Better sell Bega?

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