Dairy Farmers, a leader in milk and other dairy products, has recently agreed to purchase assets and facilities of Dean Foods, the largest milk producer in America, for $425 million. The company has agreed to assume some of Dean’s liabilities as a part of the deal of purchasing 44 facilities as well as other assets. The purchase deal is subject to approval by the bankruptcy court and the Department of Justice.
The two entities decided to go for asset purchase agreement after Dean Foods filed its Chapter 11 bankruptcy in November 2019. The company (Dean) reportedly encountered a net loss in 7 out of its 8 quarters. Its setback is due to the increasing number of health-conscious consumers and rising shift of dietary habits from dairy to non-dairy or private label products. Additionally, other factors such as volatile prices, changes in the global milk market, as well as trade wars have led to the bankruptcy.
According to the statement made by Eric Beringause, the CEO of Dean Foods, the company will entrust its customers to Dairy Farmers with whom it has had a long-standing relationship for the past 20 years. The asset deal will broaden the delivery of high-quality services to customers, which is crucial to build positive business outlook as Dean Foods had experienced accelerated decline in the conventional milk category.
After the two entities gain approval from the bankruptcy court, the agreement will turn into Dairy Farmers bidding for a substantial part of the Dean’s business. It will offer a significant possibility for Dean to gain higher offers while in bankruptcy.
Dairy Farmers could face challenges of higher bids during the bankruptcy process, despite having greater interest in expanding milk markets. Other assets and facilities that are not included in the deal with Dairy Farmers will also be introduced to various interested asset buyers.