Dean Considers Selling Morningstar Milk-Product Business

Dean Foods Co. (DF), the largest U.S. dairy processor, is considering the sale of its Morningstar unit that produces milk products for retailers and restaurants.

Dean hasn’t identified a buyer yet for the segment, which makes and sells ice cream mixes, coffee creamers and whipped toppings, Jamaison Schuler, a spokesman for the Dallas-based company, said in an e-mail today. Trading of the shares was temporarily halted after Reuters reported Dean hired Evercore Partners Inc. (EVR) to advise on the sale.

The potential sale of this unit may be part of Dean’s broader strategy to focus on subsidiary WhiteWave Foods Co., which makes Silk soy milk and International Delight coffee creamer, and the Alpro unit in Europe, said Vicki Bryan, a New York-based analyst for Gimme Credit LLC. On Aug. 7 Dean said it’s planning an initial public offering for a stake in its WhiteWave Foods unit to raise $300 million.

“It makes sense for the company to focus on their more aggressive core strategy to build national brands and free up capital that could be invested in WhiteWave, which is doing well,” Bryan said in a telephone interview today

Morningstar may be sold for about the same amount it brings in every year in sales, she said. The unit made up $1.3 billion, or 10 percent, of Dean’s $13 billion in sales last year and 15 percent of operating income, according to data compiled by Bloomberg. WhiteWave comprised 16 percent of Dean’s sales and 31 percent of operating income.

‘Difficult Conditions’

Dean has struggled recently to boost profits at Morningstar and its Fresh Dairy Direct unit as the weak economy slowed dairy consumption and retailers discounted private-label milk, Chief Executive Officer and Chairman Gregg Engles said on Aug. 8. “The industry has been through two and a half years of quite difficult economic conditions,” he said.

Dean will only sell Morningstar “if we can do so in a transaction that maximizes shareholder value and ensures the future success of the business,” Schuler said.

The shares rose 5.5 percent to $16.23 at the close in New York.

To contact the reporters on this story: Shruti Singh in Chicago at

To contact the editor responsible for this story: Simon Casey at

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