Dive Brief:

  • Dairy Farmers of America will now not serve as the stalking horse bidder for Dean Foods’ deliberate chapter sale, in response to paperwork filed Wednesday with the U.S. Bankruptcy Court for the Southern District of Texas in Houston.
  • Dean mentioned it agreed to “mutually terminate” the asset buy settlement with DFA. Bloomberg reported that Dean deserted a deal to make DFA the lead bidder following resistance from collectors and its chapter decide.
  • The dairy co-op beforehand agreed to purchase 44 of Dean’s processing amenities and different belongings for $425 million after Dean filed for Chapter 11 chapter in November. In the paperwork filed this week, Dean mentioned it nonetheless anticipated DFA to bid for its belongings regardless of dropping the place of stalking horse. The deadline to submit a bid is March 30, 2020 at 12:00 p.m.

Dive Insight:

After objections from farmers and issues about competitors surrounding the deal, DFA will now not be the stalking horse for the sale of Dean Foods. A stalking horse bidder offers a celebration the primary bid on the belongings and units the minimal quantity for which the corporate might promote.

Although this choice comes a couple of month after DFA secured the spot as lead bidder, the 2 organizations have been in talks a couple of sale for months. When Dean Foods introduced it was submitting for chapter about 4 months in the past, the corporate mentioned it was already planning to promote itself to DFA.

Dean Foods is the most important milk processor within the U.S. with 57 manufacturing amenities and a portfolio of manufacturers together with TruMoo and DairyPure. ​It made sense that DFA needed to maneuver shortly to purchase the corporate as a result of it’s the dairy cooperative’s largest buyer.

But there have been objections to DFA as the lead bidder. An amicus curiae temporary filed within the Houston courtroom March 11 on behalf of farmer advocacy organizations, dairy farmers, members of the DFA and shareholders of Dean Foods mentioned these teams vehemently opposed the deal. 

“The Court may not be aware; DFA murdered Dean. Granted Dean should not have been hanging around with mobsters,” the temporary mentioned. “This is under no circumstances hyperbolic. The hazard to America’s Dairy Industry, particular person dairy farmers and finally the shoppers can’t be overstated. DFA is the Godfather of America’s National Milk Producers Federation’s milk cartel.”

Federal antitrust regulators additionally had been probing a deal between DFA and Dean Foods earlier than it was even introduced since farm teams had raised issues in regards to the influence it might have on costs and competitors, The Wall Street Journal reported.

This is not the primary time Dean and DFA have confronted antitrust issues. Farmers filed a category motion lawsuit in opposition to Dean Foods, National Dairy Holdings, Dairy Farmers of America and others in 2007 for violating antitrust legal guidelines. The grievance mentioned Dean agreed to make DFA farmers its solely suppliers in trade for low milk costs. Dean Foods settled for $140 million in 2011, whereas DFA settled with the others within the go well with for $168 million in 2013. Despite the settlements, neither firm admitted wrongdoing within the case.

Although dropping DFA as the stalking horse will take away bid protections that favored the dairy cooperative, that doesn’t imply DFA will not nonetheless bid on the belongings. 

Dean Foods mentioned in an emailed assertion to Food Dive that it had intensive discussions with all events about this transfer and has obtained “broad support.” The firm mentioned the “mutual decision” to withdraw the request for DFA to be authorised as a stalking horse bidder doesn’t suggest that DFA has eliminated itself from the bidding course of. 

Dean Foods mentioned it nonetheless anticipates DFA to submit a bid by the court-imposed March 30 deadline. 

“Dean Foods merely believes that, by avoiding pointless litigation relating to process and bid protections for DFA, all events concerned, together with DFA, will concentrate on creating aggressive and value-maximizing bids,” the corporate mentioned. 

Overall, it’s a troublesome time for the dairy trade. Dean isn’t the one milk producer going through extreme monetary struggles. Borden Dairy filed for Chapter 11 chapter in January. Even although demand might see a slight enhance as shoppers top off on dairy as a result of of the coronavirus pandemic, analysts say it finally will simply trigger extra challenges in the long run. 

For many years, milk consumption has been declining as different drink alternate options and plant-based choices draw back shoppers who as soon as turned to the beverage. As the struggles proceed, Dean Foods possible needs to finish its chapter sale as quickly as potential earlier than issues worsen much more.

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