Dean Foods, one of the top U.S. dairy companies, filed for Chapter 11 bankruptcy. It is working towards a potential sale of the company. The company is headquartered in Dallas, Texas, and maintains distributors and processing units all over the United States. Dean Foods has listed assets and liabilities of as much as $9 billion in court papers. The largest dairy company intends to use the Chapter 11 proceedings to continue running the business operations and address debt obligations as it works out the efficient sale of the company. Dean Foods has raised approximately $800 million in Debtor-in-possession financing needed to continue operations till bankruptcy case runs. This type of funding is provided to companies in financial distress. There will be no impact on the ongoing delivery of dairy products to the customers.
Dean Foods lost its biggest customer, Walmart Inc., which established its milk processing plant. Tight competition has started in the milk business sector. The price of the milk has increased because of increased processing cost and tighter supplies, leading to reduced profit margins. Also, the likes of Americans have changed over time. They are drinking less milk now than before. There are several reasons, like so many other options to choose from other than milk. Beverages like Nut milk, flavored milk are gaining popularity. Since 2010, the consumption of milk has fallen more than 10 percent. Dean Food’s business has suffered as more consumers turned to products from Walmart etc. or non-dairy products. Dean Foods’ share price went down by 79% this year.
In September, Dean Foods conducted a strategic review and concluded for the sale of the company. Dean Foods also declared that it is in advanced discussions with a milk marketing cooperative, Dairy Farmers of America, about selling its entire assets. Even if both parties agree to the sale, the deal between both parties will be successful only if the company receives higher or better offers as the company is in bankruptcy.