Dairy Farmers of America is looking to acquire the assets of under-pressure processor Dean Foods to secure a market for its members’ milk, the US co-op told just-food today (12 November).
Earlier today, Dean Foods announced it is in talks to sell up to local peer Dairy Farmers of America – and revealed it has started voluntary Chapter 11 proceedings.
Go deeper with GlobalData
Amid falling milk consumption and rising competition – particularly in the private-label market – Dean Foods has seen sales and profits hit.
The owner of the DairyPure milk brand and TrueMoo flavoured milks posted a net loss of US$327.4m last year based on revenues of $7.8bn. In 2007, Dean Foods generated $11.8bn in sales.
In February, the company announced a strategic review of the business. Seven months later, Dean Foods said it had decided to press ahead with an internal transformation programme under recently-appointed chief executive Eric Beringause rather than pursue previously suggested options of a sale or joint venture.
Dean Foods said today it is in “advanced discussions” with Dairy Farmers of America – another of the largest dairy businesses in the US – over a potential sale of “substantially all” the company’s assets. If the parties strike a deal, a sale would be subject to regulatory approval and to higher or otherwise better offers in the bankruptcy.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData“As Dean Foods is DFA’s largest customer, our focus is ensuring we have secure markets for our members’ milk,” Monica Massey, executive vice president and chief of staff at Dairy Farmers of America, said.
“Thanks to the strategic planning and management by our farmer board of directors and management team, the cooperative is in a financial position to withstand a situation like this. We remain committed to delivering value to our members.”
In 2018, Dairy Farmers of America directed the marketing of 64.5bn pounds of milk for members and others through the cooperative’s businesses, which represent around 30 percent of milk production in the US.
The co-op, which generated a net income of $108.5m in 2018 on the back of net sales of $13.6bn, has regional brands including Borden Cheese and Keller’s Dairy. Owning 42 plants across the US, Dairy Farmers of America also acts as a supplier of dairy ingredients to food processors, including Dean Foods.
“The actions we are announcing today are designed to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” Dean Foods CEO Eric Beringause said today. “Since joining the company just over three months ago, I’ve taken a hard look at our challenges, as well as our opportunities, and truly believe we are taking the best path forward.”
Dean Foods has started the Chapter 11 proceedings in Texas, where the company is based. The business has received a commitment of around $850m in debtor-in-possession (“DIP”) financing from some of its existing lenders, led by Rabobank.
Following court approval, Dean Foods said it expects to use the financing, together with cash on hand and operating cash flows, to “support its continued operation throughout this process”, including payment to suppliers and vendors “in full under normal terms for goods and services provided on or after the filing date”.
