Vegemite is set to return to Australian ownership after dairy company Bega announced it would buy most of Mondelez International's Australia and New Zealand grocery and cheese business.

Bega, in a note to the Australian Stock Exchange on Thursday morning, said it would use bank debt to fund the $460 million acquisition.

The deal does not include Philadelphia products but will see Australian ownership of Kraft-branded products, including peanut butter, cheeses and mayonnaise.

The statement said the company would use "near-term corporate opportunities to pay down debt".

"Everybody loves cheese and Vegemite and I think that Bega Cheese and Vegemite are just a natural fit," Bega executive chairman Barry Irvin said.

"It does diversify Bega in complementary markets and categories beyond dairy.

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"We've been saying for a while that we were looking for opportunities beyond dairy, and I think there are few better than the one we have identified and acquired."

The spread was invented by the Fred Walker company in Melbourne in the early 1920s, but it gained iconic status in the '40s after it was given to soldiers as a source of vitamin B during World War II.

Early on, Fred Walker had a partnership with US-based Kraft foods and the brand was absorbed by the US company in the 1930s, and for decades it's been owned by various multinationals.

Strong business case

Mr Irvine said funding the deal with bank debt was not a risky move.

"The banks that are funding us into this deal are have funded us into virtually every major acquisition we've made.

"We are very confident in their support."

Shares in Bega immediately jumped 12 per cent when trading on the ASX opened on Thursday morning.

Late last year, shares in Bega hit a 52-week low as investors continued to offload shares in the dairy processor.

It came after the company admitted sales of its infant formula to Asia had not lived up to expectation.

Mondelez is a global giant in the confectionary, food and beverage sector.

It owns some of the world's most famous brands including Cadbury, Nabisco and Ritz.

The deal will see Bega takeover Mondelez's Port Melbourne factory.

Mondelez will retain ownership of the Cadbury brand and its Hobart factory.

Asked whether Modelez would cut jobs, or consolidate manufacturing within Australia, vice-president of the Australia, New Zealand and Japan divisions of the company, Amanda Banfield, said there were no plans to change those operations.

"This decision today has no impact on our snacking business, that continues as is though out Australia, New Zealand and indeed across our global business," she said.

"I am delighted to say that as a result of today's announcement there'll be no resulting job losses."