Milk processing plants in Decatur and Huntington could see an ownership change this spring if a bankruptcy court and the Justice Department approve their sale by Dean Foods.
The plants are among 44 fluid and frozen facilities the Dallas-based milk and dairy products company plans to sell along with real estate, inventory, equipment and other assets needed to operate them, including its store delivery system.
Dean filed for bankruptcy last November and announced in mid-February it had entered into a $425 million asset purchase agreement with Dairy Farmers of America, which it would submit to the bankruptcy court as “stalking horse” bid.
Court filings showed Dean with 57 manufacturing facilities, and in addition to the 44 it is operating on a list for sale to DFA, it has included real estate and equipment “relating to one previously closed manufacturing facility” in the asset purchase agreement.
Dean closed a plant in Rochester 60 miles west of Fort Wayne in 2015, which it had operated at least 60 years and was using to process milk and make cottage cheese. The company said it will work to find buyers for its plants that are not in the agreement.
It was not on a list of locations where Dean had facilities in the agreement or where it had facilities not included in the agreement. Doug Leman, executive director for Indiana Dairy Producers, said it would be good news for Indiana dairy farmers if the plant was included with the two other Indiana facilities DFA is looking to buy.
“I’m guessing if a viable co-op picks them up, that would be positive for all Indiana dairy producers,” he said. “Everyone could use some good news every once in a while. Good news is good news if it can help pay the bills.
“It’s been five very tough years for our producers. We had a couple of months where the prices were starting to look a lot better and getting to the point where most of them could start paying their bills,” Leman said.
With those months a pleasant memory, “we’re hoping for a better year in 2020 than we’ve had,” he said. “Right now all our producers in the state have markets, and the Dean plants are being filled by other milk currently, most likely from other co-ops.”
Anne Divjak, Dean Foods vice president for government relations and external communications, said the Rochester plant would be included with its other two Indiana facilities in the asset purchase agreement.
“It’s not on the list because it’s a closed facility and hasn’t been operational for five years. The plants on the list are all currently operating facilities,” she said.
Leman and Jackie Boerman, a dairy Cooperative Extension specialist with Purdue University, said the impact of an ownership change at the Indiana plants on the state’s dairy farmers was not easy to predict.
“I don’t think any of us know exactly how this will play out but it is positive that processors are keeping their doors open,” Boerman said in an email.
“A change of ownership may mean changes for the individual farmer, but in general, it is better to have processing capacity in the state. There will likely be continued consolidation of the dairy industry in Indiana and the U.S. as margins are tight.”
In answers to frequently asked questions at https://deanfoodsrestructuring.com/, the company has told milk suppliers they will not have to become DFA members.
As the nation’s largest milk marketing cooperative, DFA serves more than 14,000 dairy farmer members across 48 states processing, producing and distributing to stores fresh milk, cheese, ice cream and other dairy products.
Under the proposal submitted to the bankruptcy court, other potential buyers can submit offers or plans until it approves a final purchase agreement.
The court will consider a stalking horse bidding procedures motion March 12 and if it approves the motion and receives competing bids, an auction will take place in April and the court will hold a hearing to approve the asset sale April 27.
“We have had a relationship with DFA over the past 20 years, and we are confident in their ability to succeed in the current market and serve our customers with the same commitment to quality and service they have come to expect,” Eric Beringause, Dean president and CEO, said announcing the co-ops offer.
“I would like to thank all Dean Foods employees for their continued commitment to our customers, our partners and our company throughout this process,” he said.
“Their efforts have enabled us to continue providing an uninterrupted supply of high-quality dairy products, as well as support our dairy suppliers, vendors and other partners as we work to determine the best path forward for our business.”
Dean was in active discussions at the time of the DFA offer with parties interested in plants not included in the stalking horse assets, according to the related announcement.
The deadline to submit bids for the stalking horse assets and for those not included in the asset purchase agreement was set for 3 p.m. March 31.