'Happy little Vegemites': Bega buy iconic spread in $460m deal

Vegemite is back in Australian hands and its new owner is hoping Aussies are going to eat even more of it.

Dairy processor Bega Cheese has agreed to buy the iconic yeast spread and other well-known grocery brands from US-owned Mondelez International - one of the world's largest snack foods companies - for $460 million.

"Vegemite is an iconic Australian brand. It is recognised as Australia's favourite breakfast food," Bega chairman Barry Irvin said.

"It's a big day for a boy from Bega to acquire a brand like Vegemite, or to represent the company that acquires a brand like Vegemite."

For decades, the iconic Australian breakfast favourite was produced overseas. Source: Getty Images

Mr Irvin said sales of Vegemite had increased last year, but in recent years sales had been softening as the breakfast habits, particularly of younger people, had changed.

"We think that it's therefore about making sure that people think about not only how they have Vegemite at breakfast time but how they have it through the day," Mr Irvin said.

He said dairy processing will remain Bega's core business but the company will develop both cheese and other food manufacturing.

Bega's other new brands include ZoOSh salad dressings, beef extract Bonox, and products that use the Kraft brand under license, such as peanut butter, processed cheese slices, cheese spread, mayonnaise and parmesan.

Bega has also acquired the Mondelez manufacturing site at Port Melbourne, which employs 200 people who will all be retained at least until the new business is integrated.

Bega's shares soared in the wake of the announcement and were 58 cents, or 12.95 per cent, higher, at $5.06 at 1209 AEDT.

Mr Irvin said Bega had been searching for opportunities to diversify to food manufacturing categories.

"There are few better than the one that we have identified and acquired," he said.

"It will enhance our skills and capabilities; it does complement our knowledge of innovative food manufacturing processes; and it facilitates further growth."

In a deal worth $460 million, Bega purchased the production rights to the iconic Australian spread. Source: AAP

Mr Irvin said the acquisition of Vegemite and the other grocery products should give Bega's dairy farmer suppliers more confidence and security because they would be dealing with a stronger business with strong and stable returns.

Bega expects its newly acquired business to generate $40 million to $45 million in earnings before interest, depreciation and amortisation (EBITDA) in its first full year of operation, and to increase earnings per share.

Bega expects to complete the acquisition early this year.

Mondelez said the sale of most of its grocery business in Australia and New Zealand enables it to focus on its core brands, which include Cadbury Dairy Milk chocolate and Oreo biscuits.