Dallas-based Dean Foods, the largest U.S. milk producer, will be selling a “substantial” part of it business to Dairy Farmers of America (DFA), an agricultural cooperative that represents roughly 14,000 dairy producers. As part of the deal, Dairy Farmers of America would acquire 44 of Dean’s plants, its delivery system, and some other assets for $425 million, while also assuming some of Dean’s liabilities.
Dean Foods filed for bankruptcy protection last November. In the bankruptcy filing, Dean blamed its financial woes on the “accelerated decline in the conventional white milk category.” The company’s sales declined 7 percent and its profit fell 14 percent in the first half of 2019. Prior to the bankruptcy filing, Dean had reported a net loss in seven of its last eight quarters.
According to DFA, the two entities have been working on a deal since the announcement of Dean’s bankruptcy plans. Rick Smith, DFA president and chief executive officer, said in a statement, “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.”
The transaction, which requires the approval of the bankruptcy court and the U.S. Department of Justice, would be subject to receiving higher or better offers while Dean Foods is in bankruptcy. The Department of Justice will be looking at antitrust concerns.
The U.S. dairy industry has been struggling with declining milk consumption. According to the U.S. Department of Agriculture, 55 billion pounds of milk were sold in the U.S. in 2010. By 2018, that figure had fallen about 13 percent to 47.7 billion. Roughly 3.7 billion pounds of packaged fluid milk products were shipped in November, a decline of 9.4 percent from a year earlier. Efforts to close plants and cut costs haven’t offset declining sales.