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Saputo to Buy Dean’s Morningstar for $1.45 Billion

Dean has been focusing more on its WhiteWave Foods Co. business, which makes Silk soy milk and International Delight coffee cream, and said in September that it was considering selling Morningstar. Photographer: Scott Eells/Bloomberg
Dean has been focusing more on its WhiteWave Foods Co. business, which makes Silk soy milk and International Delight coffee cream, and said in September that it was considering selling Morningstar. Photographer: Scott Eells/Bloomberg

Dec. 3 (Bloomberg) -- Saputo Inc., Canada’s largest dairy processor, agreed to buy Dean Foods Co.’s Morningstar Foods unit for $1.45 billion to expand in the U.S.

The acquisition will be financed through a new bank loan and is expected to close by the end of the month, Montreal-based Saputo said today in a statement.

Saputo, which got about 53 percent of its revenue in Canada in its most recent fiscal year, is gaining a maker of creams, ice-cream mixes, sour cream and cheese to add to its namesake, Armstrong, Dairyland and Rondeau products. Morningstar had C$1.6 billion ($1.6 billion) in revenue in the 12 months through Sept. 30, Saputo said.

Dean has been focusing more on its WhiteWave Foods Co. business, which makes Silk soy milk and International Delight coffee cream, and said in September that it was considering selling Morningstar. The unit made up about $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 conducted an initial public offering in October, raising about $391 million, 22 percent more than it had sought. Dean still owns about 88 percent of WhiteWave.

WhiteWave said today in a statement that it agreed to sell some of its assets to Morningstar for $60 million, net of taxes, in connection with the takeover by Saputo.

Deal Valuation

Saputo increased 3 percent to C$47.41 in Toronto. Dean Foods, based in Dallas, rose 2.3 percent to $17.53 in New York.

The takeover values Morningstar at about 7.9 times earnings before interest, taxes, depreciation and amortization after accounting for an election to treat the deal as an asset transaction for tax purposes, Saputo said.

The transaction is the largest takeover of a dairy company globally this year, according to data compiled by Bloomberg. There have been more than 60 transactions in that industry in the past 12 months totaling about $5.8 billion. That compares with 58 deals worth about $4.9 billion in the same period a year earlier. The median buyers paid in a survey of six similar deals in the past year was 13 times Ebitda, according to data compiled by Bloomberg.

Evercore Partners Inc. provided financial advice to Dean, while Skadden Arps Slate Meagher & Flom LLP and Dechert LLP served as legal advisers. Rabobank and Rothschild Inc. were Saputo’s financial advisers.

To contact the reporter on this story: Kevin Orland in Chicago at korland@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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