Synlait Milk, 39 per cent-owned by China's Bright Dairy, said it planned to buy Christchurch-based cheese supplier Dairyworks for $112m, subject to Overseas Investment Office approval.
The price reflected 7.5 times Dairyworks' earnings before interest, tax, deprecation and amortisation over the last 12 months, Synlait said.
"The acquisition of Dairyworks will provide Synlait with another meaningful move towards the delivery of our everyday dairy strategy and complements the company's recent acquisition of cheese manufacturer Talbot Forest," Synlait said.
Synlait chief executive Leon Clement said the business was "a great strategic fit" and an important step in growing the its presence in the everyday dairy category.
"Dairyworks is a nimble and innovative company. It will fit well with Synlait and provides us with an opportunity to keep optimising our value chain while giving access into Australia where Dairyworks presence is growing," he said in a statement.
"Opportunities exist in both businesses to streamline supply chains and enhance our competitiveness. It gives us the ability to optimise how we process milk solids and get the most value from our supply of milk," he said.
Dairyworks will operate as a stand-alone business under the Synlait umbrella, with its chief executive Tim Carter, reporting to Clement.
The company was established in 2001 in South Canterbury and is one of the larger companies operating in New Zealand's everyday dairy category.
Dairyworks is now based in Christchurch, where it supplies New Zealand with almost half of its cheese, a quarter of the country's butter, as well as milk powder and the Deep South icecream.
It owns the cheese and butter consumer brands Dairyworks, Rolling Meadow and Alpine which are supplied to supermarkets in New Zealand and Australia.
A2 Milk is Synlait's second biggest shareholder after Bright Dairy, with 17.4 per cent.
Dairyworks was established in 2001.