Dean Foods, the US dairy giant, has signalled its intent to acquire businesses in its domestic milk sector with plans for a share sale to fund any deals.
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The company, which suffered last year as dairy commodities shot up in price, said today (29 February) that it would sell some 18.7m shares in the business.
The proceeds will be used to cut the company’s debt, as well as provide cash for acquistions, chairman and CEO Gregg Engles said.
“The operating environment in 2007 was extremely difficult and operating results were below the expectations we had when we recapitalised the balance sheet last March. As a result, we entered 2008 approximately a year behind our original debt reduction expectations,” Engles said.
Engles added the funds would allow Dean Foods to move for businesses in the market. “Several attractive tuck-in acquisition candidates in our core milk business have become available,” he said.
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By GlobalData“As an example, we have recently completed the acquisition of Wells’ fluid dairy operations in Le Mars, Iowa and Rich Foods Dairy in Richmond, Virginia. Both of these operations were acquired at attractive prices and will provide long-term benefits to the company.”
Looking ahead, Dean Foods warned that fluctuations in the price of dairy commodities would continue to determine the company’s results.
The company said prices remained “meaningfully above” the levels of a year ago but that, due to volatility in the sector, it had little confidence in the forecasts for dairy commodity prices.
