Dairy Farmers of America comes to the rescue of Dean Foods

The co-op will acquire a substantial portion of the its assets and business of the bankrupt firm

Marketing co-op Dairy Farmers of America (DFA) has agreed a deal to rescue Dean Foods, the largest milk producer in the USA, which filed for bankruptcy in November.

The US$425m deal will see DFA assume various liabilities to acquire 44 of the stricken company’s fluid and frozen facilities and the real estate, inventory, equipment, and all other assets necessary to operate such facilities.

The transaction remains subject to various approvals, including that of the Bankruptcy Court overseeing Dean’s Chapter 11 reorganisation and the US Department of Justice.

Dean Foods blamed its downfall on overwhelming pressures facing the dairy industry, including a reduction in milk consumption in the USA. The co-op employs 15,000 people across the country.

“Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption,” CEO Eric Berigause said in a statement at the time.

The largest dairy farmer co-operative in the US, DFA has 14,000 farmer members. It also runs 47 manufacturing plants of its own, which were acquired through mergers and purchases.
“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 US dairy industry,” said Rick Smith, president and chief executive of DFA.

“As a family farmer-owned and governed co-operative, no one has a greater interest in preserving and expanding milk markets than DFA. We are pleased that we have come to an agreement on a deal that we believe is fair for both parties.”

Eric Beringause, president and chief executive of Dean Foods, said: “We have had a relationship with DFA over the past 20 years, and we are confident in their ability to succeed in the current market and serve our customers with the same commitment to quality and service they have come to expect.”

He added: “I would like to thank all Dean Foods employees for their continued commitment to our customers, our partners and our company throughout this process. Their efforts have enabled us to continue providing an uninterrupted supply of high-quality dairy products, as well as support our dairy suppliers, vendors and other partners as we work to determine the best path forward for our business.”

The agreement will be examined during a Bankruptcy Court hearing on 12 March. The proposed agreement is subject to higher or better offers.

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