US food and beverage company Dean Foods has entered into an agreement to sell its Morningstar Foods unit to Canadian dairy company Saputo for $1.45bn.
Morningstar Foods is a producer 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.
Dean Foods expects $887m in proceeds, net of taxes and expenses, which will be used to retire outstanding term debt and increase its financial flexibility.
Dean Foods CEO Gregg Tanner said that net proceeds from the sale will be used to significantly lower outstanding debt, resulting in a stronger balance sheet and increased flexibility to implement the plans for the core dairy business.
"As we noted on our third quarter earnings call, this flexibility increases our ability to sharpen our focus on the conventional dairy business to deliver continued value to our shareholders," Tanner added.
The transaction, which is subject to customary closing conditions and regulatory clearances, is expected to close in late 2012 or early in the first quarter of 2013.
Saputo plans to fund the acquisition through a newly committed bank loan.
Dean Foods is in the process of spinning off its WhiteWave-Alpro division, which makes organic milk and soy milk. Following a divestment of Morningstar and the spin-off of WhiteWave, Dean Foods will retain its Fresh Dairy Direct division, which is a processor and direct-to-store distributor of fluid milk.
