Dean Foods announced it is exploring a sale of the US dairy business as one of a number of options to return the company to growth.
The owner of brands such as DairyPure milk and Friendly’s ice cream said other alternatives for the Dallas-based firm, which has been struggling financially, include continuing with its in-process transformation programme, the disposal of select assets, a joint venture, a “strategic business combination” or private ownership.
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Increased competition in private label is one of the factors that has been hurting Dean Foods’ financial results of late. The company is in the midst of a three-pronged transformation programme, which seeks to realise US$150m in cost savings by the end of the decade, although that has come at the expense of a number of plant closures in the US.
Chief executive Ralph Scozzafava has previously outlined the transformation strategy as being an “enterprise-wide cost productivity plan”, investment in the company’s “core capabilities” and analysing its commercial aspirations.
In its most-recent financial results for the nine months ended in September, Dean Foods said it closed and consolidated seven plants during the third quarter. But it still reported a nine-month loss of $67m, compared to a $9.2m profit a year earlier.
Sales were relatively flat at $5.8bn, while it turned in an operating loss of $51.3m versus a profit of $53.6m in the corresponding period.
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By GlobalDataScozzafava said in a statement late on Tuesday (26 February): “We are taking vital, transformative actions to maximise the benefits of our scale, and position the company for the long term, including implementing an enterprise-wide cost productivity plan and investing in core capabilities, technology, infrastructure, people and systems. As we seek to accelerate our business transformation and enhance shareholder value, the board has initiated a review of a range of potential strategic alternatives to best position the company for the future.”
Evercore Group has been hired as Dean Foods’ financial adviser to assist in this review, while Gibson, Dunn & Crutcher is acting as legal adviser.
Yesterday’s statement added that no timetable has been set for the completion of Deans Foods’ review, “nor has it made any decisions related to any potential strategic alternatives at this time”.
“As one of America’s largest dairy providers, Dean Foods is committed to delivering significant value to all our stakeholders, including our customers, consumers, shareholders, communities and employees,” Scozzafava said.
