Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

A small scoop of ice cream is packing a big punch for Dean Foods.

The largest U.S. dairy processor announced Tuesday it's paying $155 million to add Friendly's Ice Cream products like Vanilla Krunch sundae conesDutch Fudge Rolls  and good ole half gallons of ice cream to its lineup of milk products. (The purchase doesn't include the Friendly's restaurant chain, which will continue to be owned and operated by an affiliate of private-equity firm Sun Capital Partners.) 

It's not the biggest of deals, but the name Friendly's rings iconic for much of the Northeast and is almost synonymous with ice cream. It's also the kind of purchase that investors love to see: It's not expensive and significantly accretive to earnings. That's deserving of an ice-cream cone reward, particularly these days when many companies are paying sky-high prices relative to the revenue and profit they're gaining from acquisitions.

In Need of a Friendly Face
Dean Foods has had a volatile 2016, as Wal-Mart's decision to move some milk processing in-house made investors worried about a sales slump.
Source: Bloomberg

Dean Foods is paying less than the $166 million in revenue that Friendly's retail and manufacturing operations brought in last year. While that's in line with the median sales multiple for similar-sized U.S. food products deals in the last decade, in return the $1.7 billion company behind TruMoo chocolate milk will get a 6-cent, or about 4 percent, boost to its earnings per share this year. Jefferies analyst Akshay Jagdale estimates the deal could add as much as 8 percent to EPS in 2017. To put that in context, analysts on average were estimating adjusted earnings per share at a stand-alone Dean Foods to grow 1.2 percent next year. 

Dean Foods generates a lot of excess cream from milk processing that it currently sells to ice-cream manufacturers, Jagdale says. Now that cream stream can go into Friendly's products. 

Other companies have spent more to get the same benefit. In January, Pinnacle Foods paid $975 million for snack maker Boulder Brands -- a higher price in dollar terms and a bigger deal relative to its own size than what Dean Foods is proposing for Friendly's -- with the aim of boosting earnings per share by 8 percent next year. Hormel expected its $775 million purchase of sausage-maker Applegate Farms last year to deliver a roughly 6 percent boost to its EPS in fiscal 2016, based  on analysts's average profit forecast for the $21 billion company before the deal's announcement.   

Big Appetite
Deals for food products reached a record last year, led by the about $50 billion Kraft-Heinz merger.
Source: Bloomberg

Those aren't necessarily bad deals for Pinnacle and Hormel (nor are they perfect comparisons). But they do help to illustrate the wisdom of Dean Foods' ice cream run. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Brooke Sutherland in New York at

To contact the editor responsible for this story:
Beth Williams at