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Dean Foods to Sell Morningstar Food Division

07 December 2012

US - Dean Foods Company has announced entry into a definitive agreement to sell its Morningstar Foods division-a leading manufacturer of dairy, non-dairy and cultured products-to Saputo Inc. for US$1.45 billion

As a result of this transaction, Dean Foods expects to realize $887 million in proceeds, net of taxes and expenses. The Company expects to use all net proceeds to retire outstanding term debt under its senior secured credit facility, significantly lowering its leverage and increasing its financial flexibility.

Gregg Engles, Chairman of Dean Foods, said, "Morningstar is an attractive business and we believe that it will continue to grow and thrive in Saputo's portfolio. Today, Morningstar has substantial potential for accelerating growth through new distribution channels and new product categories. Mr Engles praised the staff at morning star for their work over a 15 year period with Dean Foods and wished them best luck with Saputo.

Assuming a fourth quarter close, Dean Foods' management expects its net debt to EBITDA ratio, as defined by its credit agreements, to be below 3.0x at year end 2012.

"Dean Foods will use substantially all of the net proceeds from the sale of Morningstar to significantly reduce outstanding debt, resulting in a stronger balance sheet and increased flexibility to execute against our strategies for our core dairy business," said Gregg Tanner, CEO of Dean Foods.

"As we noted on our third quarter earnings call, this flexibility increases our ability to sharpen our focus on the conventional dairy business to deliver continued value to our shareholders. As we work to complete this process, I am confident it will be a smooth transition," added Mr Tanner.

As a condition of the sale, Dean Foods also entered into an agreement with The WhiteWave Foods Company (NYSE: WWAV), a controlled subsidiary of the Company, whereby WhiteWave will receive $60 million net of taxes as consideration for the termination of an option to purchase plant capacity and property at a Morningstar facility and the sale to Morningstar of certain manufacturing equipment located at another Morningstar plant.

In addition, WhiteWave and Morningstar agreed to modify certain terms of existing intercompany commercial agreements between the two companies.

The transaction is subject to customary closing conditions and regulatory clearances, including expiration or termination of the waiting period under the Hart-Scott-Rodino Act, and is anticipated to close in late 2012 or early in the first quarter of 2013.

TheCattleSite News Desk

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