No Use Crying Over Spun Milk: Catch The WhiteWave! Dean Foods To Spin Off Branded Beverages Division

After the close this afternoon, together with reporting its earnings, Dean Foods(DF) announced it would conduct an IPO for part of its WhiteWave-Alpro division, and subsequently distribute the rest to its shareholders. We have not yet read through the S-1 filing, which can be found here. From the earnings release, we learn:

Separately, Dean Foods announced today that The WhiteWave Foods Company, which will be comprised of Dean Foods’ WhiteWave-Alpro segment, has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission (“SEC”) relating to its proposed initial public offering of up to 20 percent of its common stock.  Proceeds from the offering, as well as $800-$925 million to be borrowed under a new credit facility at The WhiteWave Foods Company, are expected to be applied to reduce Dean Foods’ outstanding debt. As a result, management expects Dean Foods’ leverage ratio to decline to approximately 3.5x debt to EBITDA, as defined by its credit agreements, following the transaction, assuming a Q4 2012 closing. In the event that the IPO is not completed by year end, management expects the Dean Foods year-end leverage ratio to be approximately 3.75x. At the time of the offering, Gregg Engles will be appointed Chairman and CEO of The WhiteWave Foods Company, while remaining Chairman of Dean Foods. Gregg Tanner, President of Fresh Dairy Direct and Chief Supply Chain Officer, will be promoted to CEO of Dean Foods. Gregg Tanner has over 30 years of food industry experience with companies including The Hershey Company, ConAgra Foods, Quaker Oats Company, and Ralston Purina Company. His leadership of Fresh Dairy Direct and the Supply Chain organization over the past 5 years with Dean Foods has been instrumental in the strong return to growth at Fresh Dairy Direct. For additional information, please refer to Dean Foods’ separate press release issued today

Interestingly, Gregg Engles, Chairman and CEO of Dean, will remain Chairman of Dean, but become CEO of WhiteWave, even though WhiteWave will be burdened with as much as $925 million in new debt in order to improve Dean’s balance sheet.  Given a Q4 estimated closing of the IPO, and a minimum of 180 days after the IPO before the spin(as per Dean’s other press release today), we’re probably 9-12 months from a distribution date for the spinoff’s shares.

WhiteWave has been performing well. In the most recent quarter, it delivered $58 million in operating income on $573 million in revenue, up 31% and 11% respectively over the prior year’s quarter. The company adds some color:

Among the product categories at WhiteWave-Alpro, net sales in the plant-based foods and beverages platform, which includes Silk® soymilk, almondmilk and coconutmilk products, increased more than 20 percent in the second quarter, driven by continued strong growth of Silk PureAlmond®. Net sales in the coffee creamers and beverages platform, which includes coffee creamers under the International Delight®, Land O’Lakes®, Silk® and Horizon Organic® brands, as well as International Delight Iced Coffee, increased by nearly 20 percent in the second quarter, driven by continued strong growth of International Delight Creamers and Iced Coffee.  Net sales in the premium dairy platform, which includes Horizon Organic® branded milk and other products, increased mid-single digits. Alpro net sales increased high-single digits on a Euro currency basis and declined mid-single digits after currency conversion.

Dean Foods acquired WhiteWave in 2002 for between $200 and $300 million and Alpro in 2009 for $455 million.

Anyone have any thoughts on this spinoff?

Disclosure: The author holds no position in DF

 

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