AP News

Mixed St. view on Dean Foods sale of Morningstar


NEW YORK (AP) — If Deans Food Co.'s sale of its Morningstar dairy business goes through, shareholders could benefit, one analyst said. That's if the deal is even possible. Another analyst thinks the milk company will have a difficult time finding a buyer.

Dean Foods, one of the country's largest dairy processor and milk distributors, said Wednesday that it hasn't found an acquirer yet, adding that it would only sell to "maximize shareholder value."

A Morningstar sale isn't the only way Dean Foods is looking to whittle down its business. The company said in early August that it's planning an initial public stock offering for its WhiteWave division, which sells Silk soymilk, Horizon Organic milk and Land O' Lakes creamer.

Morningstar is a warehouse delivery dairy business that sells products ranging from coffee creamer to blended iced beverages to retailers and foodservice providers nationwide.

The two possible deals would benefit shareholders, said BMO Capital Markets analyst Amit Sharma, on Thursday lifting his rating on Dean Foods to "Outperform." He said Morningstar isn't part of Dean Foods' core business.

But it's a "curious" time to seek a sale of Morningstar, according to Stifel Nicolaus analyst Christopher Growe. He said in a Wednesday note that he expects milk and butterfat prices to increase, which would hamper profits at Morningstar. That could make it difficult for the company to sell the division at a price that benefits shareholders, he said.

Meanwhile, Moody's Investors Service on Thursday said that selling Morningstar could help Dean Foods cut down its debt, but would "diminish the scale and diversity of the remaining business."

Shares of the company, which is based in Dallas, closed up 32 cents, or 2 percent, to $16.55 Thursday.


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