Dean Foods Company is selling Morningstar Foods to Saputo Inc., Canada's largest dairy processor, for U.S. $1.45 billion.
Morningstar is a leading manufacturer of dairy and non-dairy extended shelf-life and cultured products, including creams and creamers, ice cream mixes, whipping cream, aerosol whipped toppings, iced coffee, half and half, value-added milks, sour cream and cottage cheese.
Dallas-based Dean will use the expected $887 million in net proceeds to significantly reduce outstanding debt, "resulting in a stronger balance sheet and increased flexibility to execute against our strategies for our core dairy business," said CEO Gregg Tanner.
The Morningstar sale, expected to close by late 2012 or early 2013, leaves Dean largely a producer of branded and private-label milk.
As a condition of the sale, Dean Foods also entered into an agreement with The WhiteWave Foods Company, a controlled subsidiary of the company, whereby WhiteWave will receive $60 million net of taxes as consideration for the termination of an option to purchase plant capacity and property at a Morningstar facility and the sale to Morningstar of certain manufacturing equipment located at another Morningstar plant. In addition, WhiteWave and Morningstar agreed to modify certain terms of existing intercompany commercial agreements between the two companies.
Morningstar, which had 2011 sales of $1.3 billion, is expected to complement the activities of the Saputo Dairy Products Division, which is based in Illinois, reported the Dallas Morning News.