DFA announces $425M agreement to purchase Dean Foods
Farmers shipping milk to one of Dean Foods processing plants have been on tenterhooks since the milk-processing giant announced it had filed for Chapter 11 bankruptcy protection in mid-November.
Many of those producers in Wisconsin ship their milk to Dean Foods' plant in DePere, Wis., while others send their milk south to Dean plants in northern Illinois. Dean Foods is owned by and serves more than 14,500 dairy farmer-members representing more than 8,500 dairy farms in 48 states.
This week they received a letter from Dairy Farmers of America Inc. (DFA), President and CEO Rick Smith that the cooperative had reached an agreement to buy the ailing Dean Foods.
According to Smith, DFA, the country's largest dairy co-op, will pay a base purchase price of $425 million, and assume various liabilities, subject to certain adjustments, to acquire 44 of Dean's frozen and fluid facilities, real estate, equipment, inventory, and associated direct store delivery system.
Under the deal, Dairy Farmers of America agreed to make job offers to Dean Foods workers at the 44 facilities. Dean Foods has about 15,000 employees nationwide.
Smith told Dean Foods milk producers that the transaction would be paid for with cash, financed by lending institutions and a credit against receivables DFA was owed from Dean at the time if filed for bankruptcy.
"As Dean is the largest dairy processor in the country and a significant customer of DFA, it is important to ensure continued secure markets to our members' milk and minimal disruption to the U.S. dairy industry," said Smith in a statement.
Eric Beringause, President and CEO of Dean Foods, said that despite the company's best efforts to make the business more agile and cost-efficient, it struggled in a market challenged by continuing declines in consumer milk consumption.
"Americans are not drinking milk like they used to for a number of reasons, the most prevalent being that there is so much more to choose. We've simply diversified our mealtime and snacktime routines," he said.
Beringause told the Business Wire that his company's 20-year relationship with DFA warranted his confidence in the DFA's "ability to succeed in the current market and serve our customers with the same commitment to quality and service they have come to expect."
Dean Foods’ portfolio includes national brands DairyPure and TruMoo, along with regional brands including Alta Dena, Berkeley Farms, Country Fresh, Dean’s, Friendly’s, Garelick Farms, Land O Lakes, Lehigh Valley Dairy Farms, Mayfield, McArthur, Meadow Gold and Oak Farms. It also makes private label dairy products, ice cream, cultured products, juices, teas and bottled water.
While DFA and Dean Foods have reached an agreement with Dean, there are still several steps until the deal becomes final, including approval from the Bankruptcy Court (a hearing is slated for March 12), and the U.S. Department of Justice.
In January, federal anti-trust regulators from the U.S. Department of Justice (DOJ) reached out to farmers and retailers to discuss potential market impact of a merger between the two dairyland giants. Industry watchdogs warned that a DFA buyout of Dean Foods could give it "monopoly-like power" over the milk market.
DFA Executive Vice President and Chief of Staff Monica Massey told Farm Journal's MILK that the giant cooperative was looking for a deal that was "fair for all".
"Not just for DFA members, but for other farmers, too" she told the Farm Journal. "You've got a lot of farmers shipping to them, a lot of employees working for them, a lot of communities counting on them, and a lot of school programs in need of their product."
According to corporate communications, facilities listed in the DFA purchase agreement include operations in 23 states, including the Dean Foods plant in DePere, Wis.
According to the Dallas Morning News, Dean Foods said it’s in discussion with other parties for plants and assets not included in the Dairy Farmers of America agreement. Court documents indicate its investment banker, Evercore Group, received interest from 99 strategic or financial buyers after the bankruptcy filing.
Anthony Pahnke, vice president of Family Farm Defenders, said a deal between DFA and Dean Foods would be "bad news....further tilting power in the food system against family farmers and consumers".
"Instead of more concentration in agriculture, we need less," said Pahnke who supports a plan in which the government would purchase Dean Foods and restructure it in a way that would open markets for farmers. "Dean Foods could be an opportunity, not for DFA, but for our nation's food system."
According to Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison, Dean Foods represents at least a third of fluid milk sales (in the US) and 10% of total milk sales. In 2018, Dean Foods had $4.8 billion in sales.
"As a family farmer-owned and governed cooperative, no one has a greater interest in preserving and expanding milk markets than DFA," Smith said.