Dairy Farmers of America offers $425M for bankrupt Dean Foods’ assets

Headquartered in Kansas City, Kansas, DFA is the nation’s largest dairy cooperative. Since Dean and its 42 entities announced plans to file for Chapter 11 bankruptcy protection, “the two parties have been working to reach an agreement,” DFA said in a statement on Monday.

“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,” said Rick Smith, chief executive of DFA.

The deal includes the purchase of 44 of Dean’s facilities and its associated direct-to-store delivery system (DSD), as well as certain corporate and other assets and functions, according to the DFA statement.

Dean Foods operates a fleet of more than 5,000 trucks that distribute products in nearly all 50 states as part of the company’s DSD system.

In recent years, Dean has lost contracts with dairy producers across the country after Walmart opened its own milk-processing facility in 2018, offering white and chocolate milk under Walmart’s Great Value brand.

Dairy processors blame rising raw milk costs, reduced milk consumption and increased competition among nondairy alternatives, including almond, coconut and soy milk, for the declining milk market.

Borden Dairy Co., a rival of Dean also headquartered in Dallas, filed for Chapter 11 bankruptcy protection in early January as the price of conventional raw milk rose 27% compared to the same time a year ago.

Dean was also rocked by an insider trading scandal after its former chairman, Thomas C. Davis, was sentenced to two years in prison in October 2017 after being convicted of providing inside information to famed sports bettor William T. Walters. According to federal prosecutors, Walters, who is serving a five-year sentence, made more than $40 million over a six-year period based on information he received from Davis.

DFA’s potential acquisition of Dean is subject to approval by the U.S. Bankruptcy Court for the Southern District of Texas, as well as the U.S. Department of Justice, according to the DFA statement.

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