Bega Cheese will buy Lion Dairy & Drinks for $534 million and substantially bolster its product range and retail presence.
Bega on Thursday told the share market of its purchase, which includes milk, cream, juice and yoghurt products under brands such as Dairy Farmers, Pura and Yoplait.
Executive chair Barry Irvin said the deal would provide more manufacturing and distribution resources, and benefit Bega's supply chain.
Japanese company Kirin owns Lion, which also produces alcohol and soft drinks across Australia and New Zealand.
Lion chief executive Stuart Irvine said the sale would help the company invest in beer and seltzer.
Lion sold its cheese business to Saputo Dairy Australia last year for $280 million.
Bega said it aims to complete the purchase at the end of January.
The Australian Competition and Consumer Commission has already approved the sale.
Bega will raise $401 million from a share sale to institutions and retail investors to fund the purchase.
Shares will be offered for $4.60 each, which is a 9.1 per cent discount on the last traded price of $5.06 last week.
Shares are expected to resume trading on Friday.
Management said the Lion purchase would not change their approach to paying dividends.
