Dean’s WhiteWave Spinoff Seen Opening Door to Takeover

Dean Foods Co.’s WhiteWave Foods Co. unit may become a takeover target for buyers such as General Mills Inc. after it is spun off from the dairy maker, said Alexia Howard, an analyst at Sanford C. Bernstein & Co.

WhiteWave shares will be offered this month, Dallas-based Dean, which will retain a minority stake, said yesterday in a statement. Dean also announced a reverse split of its shares and the resignation of its chairman and three other directors. Dean will be left with about a 20 percent equity holding in WhiteWave, Howard said.

WhiteWave, which makes Silk soy milk and Horizon Organic products, has been among Dean’s most profitable units by operating margin as more health-conscious consumers migrate to plant-based and organic milks. General Mills, whose yogurt business is struggling against Greek varieties, may look to acquire WhiteWave to take advantage of the trend, Howard said.

“This could pave the way for an acquisition of the WhiteWave Foods company,” Howard, who’s based in New York, said today in a note. “It is also possible that other multinational food and beverage companies could express interest in such a dynamic business.”

Howard rates Dean outperform, the equivalent of a buy.

Dean rose 1.9 percent to $19.20 at the close in New York. WhiteWave jumped 5.6 percent to $17.73, for the biggest one-day jump since its market debut in October 2012.

Kirstie Foster, a spokeswoman for Minneapolis-based General Mills, declined to comment.

Spinoff Details

Shareholders will receive about 47.7 million WhiteWave Class A shares and 67.9 million Class B shares on May 23. For each share of Dean common stock, holders will receive about

0.256 shares of WhiteWave Class A common stock and approximately

0.364 shares of WhiteWave Class B common stock, the company said.

The action “puts the spinoff of WhiteWave in motion,” Dean Chief Executive Officer Gregg Tanner said in the statement yesterday. The separation “puts both companies on a path for future success in their respective businesses.”

Dean said Gregg Engles resigned as chairman and a director, effective immediately. Tom Davis was appointed to replace him. Stephen Green, Joseph Hardin Jr. and Doreen Wright also resigned from the board. The company has withdrawn Engles’s nomination for re-election at its annual meeting and cut the board’s size from 12 to eight, according to the statement.

Dean will seek stockholder approval for the reverse stock split. Shares will be issued at a ratio of at least 1-for-2 and at most 1-for-8, the company said.

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