The Dairy Farmers of America (DFA) cooperative made a stalking-horse bid of $425 million to acquire 44 percent of the assets of America’s number one milk processor Dean Foods.
The Kansas City-based cooperative offered $425 million for 44 percent of its assets plus the assumption of various liabilities after Dean Foods Co. filed for chapter 11 bankruptcy protection last year.
“As Dean is the largest dairy processor in the country and a significant customer of DFA, it is important to ensure continued secure markets for our members’ milk and minimal disruption to the U.S. dairy industry,” DFA CEO Rick Smith said in a Monday release. “As a family farmer-owned and governed cooperative, no one has a greater interest in preserving and expanding milk markets than DFA. We are pleased that we have come to an agreement on a deal that we believe is fair for both parties.”
The Dairy Farmers of America has struck a $425 million deal with Dean Foods Co. to buy most of its plants following Dean Foods’ bankruptcy filing last November. https://t.co/Qck74A425U #SFANews
— Specialty Food Association (@Specialty_Food) February 18, 2020
Likewise, Dean president and chief executive officer Eric Beringause shared his confidence in the agreement by saying, “We have had a relationship with DFA over the past 20 years, and we are confident in their ability to succeed in the current market and serve our customers with the same commitment to quality and service they have come to expect.”
The deal still needs to be approved by several anti-trust regulators and legislative authorities like the Bankruptcy Court and the Department of Justice.
Federal antitrust regulators are probing a possible deal between a major U.S. dairy cooperative and Dean Foods Co., the bankrupt milk-processing giant, as the dairy industry realigns after decades of declining milk consumption. https://t.co/AFcs4pDqsr via @WSJ #Teamsters
— Teamsters (@Teamsters) January 29, 2020
A bankruptcy court hearing is scheduled for March 12, Supermarket News reported. However, third parties still have the opportunity until March 31 to provide a better or higher bid to any or all of the assets included in the stalking horse agreement, or on assets that are not part of the deal.
Dean Foods Declares Bankruptcy
Dean Foods, the No. 1 producer of milk in the United States, filed for Chapter 11 bankruptcy protection on Nov. 12, 2019.
“Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption,” CEO Eric Beringause said in a statement at that time.
The company produces milk for popular brands, including Land O’Lakes, Organic Valley, and Dairy Pure.
According to CNN, the Dean secured $850 million in financing from several lenders last year, including Rabobank, to keep it running.
Since about 1975, the amount of milk consumed per capita in America has dropped by about 40 percent, noted The Associated Press. Experts have said that other choices such as sodas, teas, and plant-based milk such as soy or almond milk are crowding the market.
The global market for milk alternatives is estimated to have made $18 billion in 2019, which is up about 3.5 percent from 2018, according to CNN, citing Euromonitor. The cow’s milk market makes about $120 billion worldwide each year.
Dean Foods was also under pressure because Walmart opened up its own processing plant in Indiana in 2018. The move caused Walmart to drop Dean Foods as its milk supplier, CNN reported.
Epoch Times reporter Jack Phillips contributed to this report.
