Dean Foods files Chapter 11 bankruptcy
DALLAS, Texas — Dallas-based milk processor Dean Foods announced it and substantially all of its subsidiaries have initiated voluntary Chapter 11 reorganization proceedings in the Southern District of Texas. The company intends to use this process to protect and support its ongoing business operations and address debt and unfunded pension obligations while it works toward an orderly and efficient sale of the company.
The company has a milk plant in Le Mars, which it purchased from Wells Enterprises in January 2008.
The milk plant is one of about 100 Dean Foods manufacturing facilities. Dean Foods is the largest processor and distributor of milk and other dairy products in the U.S., with corporate headquarters in Dallas, Texas. According to its website, the company has 60-plus local processing plants from coast to coast.
Calls to the Le Mars plant were referred to the corporate offices.
In its prepared statement, Dean Foods also announced it is engaged in advanced discussions with Dairy Farmers of America, Inc. (“DFA”) regarding a potential sale of substantially all assets of the company. If the parties ultimately reach agreement on the terms of a sale, such transaction would be subject to regulatory approval and would be subject to higher or otherwise better offers in the bankruptcy.
As far as daily operations, the company stated, "We are operating as normal and remain focused on providing customers with wholesome, great-tasting dairy products and the highest levels of quality, service and value while also continuing to support our suppliers as always have."
The company has received a commitment of approximately $850 million in debtor-in-possession (“DIP”) financing from certain of its existing lenders, led by Rabobank.
Following court approval, the company expects to use the DIP financing, together with cash on hand and operating cash flows, to support its continued operation throughout this process, including payment of employee wages and benefits without interruption and payment to suppliers and vendors in full under normal terms for goods and services provided on or after the filing date.
“The actions we are announcing today are designed to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” said Eric Beringause, who joined Dean Foods as president and chief executive officer in July 2019. “We have a strong operational footprint and distribution network, a robust portfolio of leading national brands and extensive private label capabilities, all supported by approximately 15,000 dedicated employees around the country. Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption. Importantly, we are continuing to provide customers with an uninterrupted supply of high-quality dairy products, as well as supporting our dairy suppliers and other partners.”
Beringause continued, “Since joining the company just over three months ago, I’ve taken a hard look at our challenges, as well as our opportunities, and truly believe we are taking the best path forward. In recent months, we have put in place a new senior management team that not only has considerable experience in the dairy and consumer product industries, but also in executing major turnarounds. I am confident we have the right people in place to lead us through this process. I want to thank all Dean Foods employees for their continued commitment to our customers, our partners and our company. I also want to thank our suppliers and other business partners for their cooperation and our customers for their continued support.”
In light of the bankruptcy filing, the company cancelled its quarterly earnings call, which was scheduled to take place at 9 a.m. Eastern time on Tuesday.
According to the U.S. Department of Agriculture, Americans consumption of fluid milk has fallen 26 percent in the last two decades.
Beringause is a food and beverage veteran who was formerly the chief executive officer of Gehl Foods LLC. He has 30 years experience in the food, beverage and consumer products industry.