Why the Bega Cheese (ASX:BGA) share price is rising again today

The Bega Cheese Ltd (ASX: BGA) share price is up again today, making it a very good week for this new dairy giant. Here's why…

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Bega Cheese Ltd (ASX: BGA) shares are again having a top day on the markets today. At the time of writing, the Bega Cheese share price is up another 0.74% to $5.46. The S&P/ASX 200 Index (ASX: XJO) is commensurately down 0.9%, meaning Bega is significantly outperforming the broader market today.

It was a lot better earlier in the day too. Soon after open, Bega reached a high of $5.78, which was a gain of more than 5% at that time, before settling at its current share price. On today's moves, the Bega share price is now up nearly 11% over the past month, and up more than 28% year to date.

So why is this company continuing to power ahead today?

Bega brings home the bacon… and cheese

Today's rise in the Bega share price is likely a continuation of the market reaction to last week's blockbuster acquisition news. On Friday, Bega told the markets it had successfully bid for Lion's dairy and drinks portfolio of products and brands. Lion is a giant company and a subsidiary of the Japanese titan Kirin. It owns a massive portfolio of brands, including beers like XXXX, Toohey's, Hahn, James Squire and Little Creatures, as well as McKenna Bourbon and Four Pillars Gin.

But it's the dairy and drinks division that Bega is acquiring from Lion, not the company's alcoholic beverage assets. This portfolio includes well-known and iconic Aussie dairy staples like Dairy Farmers, Pura, Dare, Big M, Farmers Union and Yoplait, as well as other well-known beverage brands like Berri, Daily Juice Co and Vitasoy.

Bega is reportedly paying Lion $534 million for the acquisition, which is set for final completion early next year. This acquisition comes three years after Bega's last blockbuster deal. That saw the company acquire another iconic Australian brand – Vegemite – from another large foreign multinational, the United States giant Mondelez International Inc (NASDAQ: MDLZ). Mondelez is the owner of brands like Cadbury, Ritz and Oreo and old licensee of the Kraft brand in Australia. That deal also included the acquisition of the Kraft-branded peanut butter and mayonnaise ranges, as well as Kraft's famous Mac 'n' Cheese.

What does this purchase mean for Bega?

According to reporting in the Australian Financial Review (AFR) last week, the Lion deal will see Bega's latest annual revenue of $1.6 billion supplemented with another $1.5 billion in sales that Lion brings to the table. It will also swell Bega's 7 manufacturing plants to 20, and add 134 distribution centres to Bega's existing 10. The AFR also tells us that this deal will result in Bega's revenue from branded products increasing from its current 59% level to 80% after the deal. 

Motley Fool contributor Sebastian Bowen owns shares of Mondelez International and Kraft Heinz. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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