Private Label Buyer

Saputo Lands Morningstar for $1.45 Billion

December 3, 2012

Montreal-based Saputo announced Monday that it agreed to buy the private label division of Dean Foods for $1.45 billion.

Dean's Morningstar Foods division is a manufacturer of dairy and non-dairy extended shelf-life (ESL) 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. These products are manufactured under a wide array of private labels and owned brands, and are sold nationwide through an internal sales force and independent brokers. Morningstar serves the needs of retailers, national quick-serve restaurant chains, grocery stores, mass merchandisers and distributors across the United States.

The deal is expected to close by the end of December. For the 12 months ended Sept. 30, 2012, Morningstar had revenues of about $1.61 billion, and earnings before interest, taxes, depreciation, and amortization of about $154 million.

"This is an exciting time for all of us at Morningstar," Morningstar Foods President Kevin Yost said in a news release announcing the deal. "In recent years, the business has grown significantly faster than the industry, driven by strong execution, new product innovation and consumer trends that favor our products. Our employees and customers continue to be the centerpiece of our company. Our customer-centric business model and a disciplined cost control mindset have enabled our growth and we look forward to the next chapter in Morningstar's evolution."

Dean Foods is the largest dairy processor in North America, according to the Dairy 100 list produced by Dairy Foods magazine. Saputo is third on the list, and is Canada's largest dairy producer.

Morningstar Foods Morningstar has about 2,000 employees and operates 10 manufacturing facilities located in nine states. With the acquisition, Saputo will have about 12,000 employees and 57 manufacturing facilities in five countries.

"Morningstar is an attractive business and we believe that it will continue to grow and thrive in Saputo's portfolio," Dean Foods Chairman Gregg Engles said in the release. "Today, Morningstar has substantial potential for accelerating growth through new distribution channels and new product categories.  I'd like to personally thank the Morningstar team for their contributions to Dean Foods over the past 15 years and wish them well as they move forward under new ownership. By joining Saputo, we believe Morningstar will be well positioned for continuing success and future growth."

Saputo's products are sold in more than 50 countries under well-known brand names such as Saputo, Alexis de Portneuf, Armstrong, Baxter, Dairyland, Danscorella, Dragone, DuVillage 1860, Frigo Cheese Heads, Great Midwest, King's Choice, Kingsey, La Paulina, Neilson, Nutrilait, Ricrem, Salemville, Stella, Treasure Cave, hop & go, Rondeau and Vachon.

Saputo said in a news release that the Morningstar acquisition would complement its Saputo Dairy Products Division in the U.S.

"Through this acquisition, Saputo will benefit from Morningstar's national manufacturing and distribution footprint, and will optimize coast-to-coast service," the release stated. "This transaction will expand product offering to customers in the United States and broaden the range of Saputo's future acquisition opportunities."

As a condition of the sale, Dean Foods also entered into an agreement with The WhiteWave Foods Co., a controlled subsidiary of Dean, where WhiteWave will receive $60 million net of taxes as consideration for the termination of an option to buy plant capacity and property at a Morningstar facility, and the sale to Morningstar of certain manufacturing equipment located at another Morningstar plant. In addition, WhiteWave and Morningstar agreed to modify certain terms of existing intercompany commercial agreements between the two companies.