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Dean Foods Bondholders Just Say No to Merger With Dairy Co-op
USAgNet - 11/14/2019

Dean Foods Co., the biggest U.S. milk processor which filed for Chapter 11 bankruptcy protection Tuesday, has said it's in advanced talks to sell assets to milk cooperative giant Dairy Farmers of America. Bondholders, however, aren't convinced that's a good deal. According to Bloomberg, an attorney for a third of the company's bondholders said that while Dean is "focusing exclusively" on a combination with the co-op, that option won't be "value-maximizing." The deal may not even be feasible due to antitrust concerns, the attorney said at the hearing in front of Judge David Jones in U.S. bankruptcy court for the Southern District of Texas in Houston.

"We don't want a quick sale, a fire sale, without a true market check or opportunity for other potential bidders to put in a real proposal," said Bob Britton, an attorney at Paul, Weiss, Rifkind, Wharton & Garrison LLP, which represents the group.

The bondholder group approached Dean to offer alternatives, including capital to invest in a standalone restructuring plan and alternative financing. But the proposal "made no headway," Britton said.

When asked by the judge if the group had enough capital to buy Dean Foods, Britton's answer was yes.

Dean ranks as the biggest U.S. dairy processor, employing about 15,000 people and delivering about 2.2 billion gallons a year of milk and other dairy products, according to its bankruptcy declaration. The company's long list of institutional customers includes McDonald's Corp., Starbucks Corp. and Target Corp.

Facing financial distress, Dean looked into selling all or parts of the company among other options to strengthen its balance sheet, according to the court filing. But the company faced an obstacle in its underfunded multi-employer pension plan, for which it might wind up owing more than $700 million. That stymied any hope of out-of-court transactions, and meanwhile results were deteriorating faster than Dean had forecast, the company said.

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