“America’s biggest milk producer” files for bankruptcy

Dean Foods, America’s “biggest milk producer,” has announced that it has initiated voluntary Chapter 11 reorganisation proceedings in the Southern District of Texas. The company has said it has seen drastic effects from the shift in consumer choice to more dairy-alternative products.

The company intends to use this bankruptcy process to protect and support its ongoing business operations and address debt and unfunded pension obligations while it works toward an orderly and efficient sale of the company.

Dean Foods also announced that it is engaged in “advanced discussions” with Dairy Farmers of America, Inc. (DFA) regarding a potential sale of substantially all assets of the company. If the parties ultimately reach agreement on the terms of a sale, such transaction would be subject to regulatory approval and would be subject to higher or otherwise better offers in the bankruptcy.

Following court approval, the company expects to use debtor-in-possession (DIP) financing, together with cash on hand and operating cash flows, to support its continued operation throughout this process, including payment of employee wages and benefits without interruption and payment to suppliers and vendors in full under normal terms for goods and services provided on or after the filing date.

“The actions we are announcing are designed to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” said Eric Beringause, Dean Foods President and Chief Executive Officer. “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.”

“A number of [the National Milk Producers Federation’s] member cooperatives provide milk to Dean Foods and could be impacted by this bankruptcy filing,” Alan Bjerga, the Senior Vice President of communications for the lobbying group, said in a statement to CNBC. “We are gathering information to better assess the situation and will work closely with our members to provide whatever support we are able to through this process.”