Dean Foods Jumps on Speculation of Wahaha Group Takeover Bid

  • Hangzhou Wahaha Group approached banks, Financial Times says
  • Dean’s shares closed up 11%, biggest gain since November 2014

Dean Foods Co., the largest U.S. milk processor, surged the most in almost two years on speculation that a Chinese food and beverage distributor may make a bid for the company.

Hangzhou Wahaha Group has approached banks to aid in financing a potential offer for Dallas-based Dean Foods, the Financial Times reported on Friday, citing four unidentified people familiar with the proposal. A unit met with several banks to prepare for a bid, according to the report.

Dean soared 11 percent to $18.49 in New York, the biggest one-day gain since Nov. 10, 2014.

Dean doesn’t have a comment, spokesman Jamaison Schuler said in an e-mail. Wahaha Group couldn’t immediately be reached for comment outside of normal business hours.

Dean’s “valuation was incredibly low compared to the rest of the industry and the rest of the market,” Stephens Inc. analyst Farha Aslam, who holds an overweight rating on the stock, said in a telephone interview. “Dean has one of the best refrigerated food distribution networks in the industry. The company its improving its operations. It’s improving their product mix.”

Declining Consumption

Purchasing Dean would give a buyer a host of dairy brands including Country Fresh and TruMoo. The company has been seeking new markets and products as it adapts to a long-term decline in per-capita milk consumption. It acquired the manufacturing and retail operations of Friendly’s Ice Cream LLC earlier this year.

The company also introduced the DairyPure milk brand, which has no artificial growth hormones, to counter the advance of organic milk and soy- and almond-based substitutes. Dean is raising prices for the DairyPure brand amid growing sales, according to a letter to customers obtained by Bloomberg News earlier this month.

Dean’s second-quarter profit reported on Aug. 8 missed analysts’ estimates as sales volumes slipped.

— With assistance by Shruti Singh

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