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November 12, 2019

Dean Foods Files for Bankruptcy, Hopes To Sell to DFA

 |  By: Anna-Lisa Laca

Dean Foods on Tuesday filed for Chapter 11 bankruptcy with hopes to sell its assets to Dairy Farmers of America, the Wall Street Journal reports. This comes just days before the dairy processing company was expected to release its Q3 earnings report and two months after the company said, following a strategic review, that they were not planning to sell. 

According to the WSJ, Dean foods and DFA are in “advanced talks” regarding the deal.  

“The company said it is advanced talks for the sale of substantially all of its assets to Dairy Farmers of America, adding that any deal would be subject to higher or otherwise better offers in the bankruptcy case,” they reported. 

In a statement DFA said their focus is ensuring secure markets for their members' milk. 
 
"Thanks to the strategic planning and management by our farmer Board of Directors and management team, the Cooperative is in a financial position to withstand a situation like this," they said. "We remain committed to delivering value to our members and dedicated to preserving the family farm for generations to come."

Dean Foods said it has nearly $850 million secured in debtor-in-possession financing to continue regular operations until the deal is finished, which is good news for the thousands of dairy farmers who ship their milk to the processor. 

This decision will likely not surprise too many in the dairy industry. Dean Foods posted losses in 7 of the past 8 quarters. Additionally, they’ve been very vocal about their challenges in the fluid milk space and the competition of retail giants like Walmart processing their own milk. 

"[Dean Foods] has been a slow moving train wreck, and it's been for sale for a long time nobody's want to pick it up," says Brian Rice of Vault Ag. "DFA is always been the ultimate backstop because it is such a huge outlet  for their milk, and that's what's happened."

Rice says he's not sure how happy DFA will be about acquiring the Dean assets, but they're the most logical choice to purchase them.

This is a developing story.

 

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