Local processors want piece of Dean Foods dairy biz

-April 8,2020-

The US’s largest dairy processor, Dean Foods announced late last week that the U.S. Bankruptcy Court had approved the sale of a substantial portion of Dean Foods’ business operations.It includes 44 fluid and frozen facilities to be sold to Dairy Farmers of America – the nation’s largest diary co-op – for $433 million.

The court ruling came despite objections from several creditors including Visalia-based California Dairies Inc (CDI), the number two dairy co-op in the country. CDI says it is owed at least $3.5 million as well as ongoing milk sales since the bankruptcy was announced last November – adding up to another $7 million.

Significantly, the parties agreed to include language in their sale contract that would let certain grocery chains and dairy groups file claims against the big merger. Those claims include CDI.

In a court filing, attorneys for CDI say they were not allowed to bid on assets of Dean Foods that CDI would be interested in purchasing, including Alta Dena, the LA-based retail operation  that Dean Foods acquired in 1999. That home-grown brand remains one of the most popular in southern California.

CDI is a milk marketing and processing cooperative owned by nearly 400 California dairy farmers. As the second largest milk marketing cooperative in the United States, CDI produces 16 billion pounds of milk annually, 40% of California’s milk by volume, 20% of the total butter manufactured in the United States, and also operates as the largest U.S. leading manufacturer of butter and milk powder. In connection with its operations, CDI has supplied milk, butter, and related products to Debtor Alta-Dena Certified Dairy, LLC among other Debtors says a  CDI court filing. Alta-Dena processes fluid milk, ice cream and other dairy products with distribution throughout Southern California and Arizona.

Dean Foods other big asset in the state is the Berkeley Farms brand in the Bay Area that has been awarded to Fresno-based  Producers Dairy says Dean Foods. A news release says Producers  will also pick up a Reno, Nevada processing facility for $3.7 million and the “Berkeley Farms” trademark and for $3 million. Producers has milk plant in Fairfield that serves the Bay Area now.The company has a storied history in Fresno – first launched in 1932 remembered by those who grew up here as Hoppy’s Favorite in their advertising.

CDI has close ties to the Southland market, historically sending a large number tanker loads of Valley milk over the Grapevine every day.They own a processing plant in Artesia in a region where many Dutch CDI members had dairy farms founded there before they migrated to the Visalia area.

In their legal filing, CDI says it was not given a chance to make a bid for Dean Foods assets but will now use the next round of anti-trust objections to make a claim.

Their court papers makes this clear. “It is the position of CDI that the sale process resulting in the bid of Dairy Farmers of America, Inc. failed to afford all prospective buyers a full, fair, and reasonable opportunity for all persons to make informed bids. For nearly two months before the deadline for Qualified Bids, CDI—a genuine prospective purchaser—repeatedly requested basic diligence information from the Debtors. The Debtors, while indicating to CDI that information was forthcoming, severely delayed or outright refused to provide CDI with key requested diligence information, much of which was basic economic information.”

Summing it up – the filing states ”CDI has been walled off from Committee deliberations involving the specific sale of any of the Debtors’ assets.”

The court allowed that The Maryland & Virginia Milk Producers Cooperative Association, California Dairies and the grocery chains Stop & Shop and Food Lion are all eligible to file antitrust claims against the Dean Foods/DFA merger.