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Dean Foods plans WhiteWave IPO

by Richard Collings | Published August 8, 2012 at 4:10 PM

Dean Foods Co., the Dallas-based dairy conglomerate, swung to a second-quarter profit and announced late Tuesday, Aug. 7, that it would spin off its WhiteWave Foods Co. subsidiary through an initial public offering.

The news sent Dean Foods' stock up 38% in afternoon trading, to $17.14 per share, giving it a market capitalization of $3.14 billion.

Dean Foods seeks to raise about $300 million through an IPO of 20% of WhiteWave, which makes Horizon Organic dairy products and Silk soymilk. Dean Foods said in an S-1 registration filed with the Securities and Exchange Commission on Tuesday that it will continue to own at least 80% of WhiteWave following the IPO.

JPMorgan Securities LLC, Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch will serve as joint bookrunning managers for the offering.

Dean Foods said it will issue its remaining 80% stake in WhiteWave to Dean Foods' shareholders in a tax-free distribution no earlier than 180 days following the closing of the IPO.

The listing of WhiteWave consists of the WhiteWave-Alpro segment, which includes Silk soymilk, almond-milk and coconut-milk products, as well as coffee creamers made under the International Delight, Land O'Lakes, Silk and Horizon Organic brand names. The division also sells the International Delight iced coffee and Horizon Organic branded milk products.

Dean Foods said it will use proceeds from the IPO, plus $800 million to $925 million that will be borrowed by WhiteWave under a new credit facility, toward reducing Dean Foods' outstanding debt. The company said it expects its leverage ratio to decline to approximately 3.5 times Ebitda, assuming a fourth-quarter closing.

For the year ended Dec. 31, Dean Foods had net sales of nearly $13.1 billion, according to SEC filings. About $2.1 billion, or 16%, of Dean Foods' net sales came from its WhiteWave-Alpro division.

Dean Foods chairman Gregg Engles will serve as chairman and chief executive of WhiteWave after the IPO. Gregg Tanner, president of the fresh dairy direct division and chief supply chain officer, will be promoted to CEO of Dean Foods.

In releasing its 2012 second-quarter results, Dean Foods said net sales for WhiteWave were up 11%, to $573 million, while operating income for the unit jumped 31% to $58 million. Net sales at the plant-based foods and beverages platform, which includes products made under the Silk brand name, increased more than 20% in the second quarter, driven in part by its Silk PureAlmond beverage, the company said. Similarly, net sales for the coffee creamers and beverages platform spiked by nearly 20%, driven by its International Delight creamers and iced coffee.

Dean Foods' net income was $56 million, compared to a net loss for the same period a year ago of $51 million. Net sales were $3.1 billion, versus $3.3 billion a year ago, reflecting lower dairy commodity costs, the company said.

Dean Foods seeks to spin off WhiteWave as valuations in the natural and organic foods sector continue to climb. Annie's Inc., a maker of organic food products ranging from snacks to macaroni and cheese, saw its stock soar as high as 84.2% above the $19 per share price it targeted for its March 28 IPO.

Annie's stock traded at $41.70 on Wednesday, giving it a market capitalization of about $694 million, or more than 40 times the company's 2011 adjusted Ebitda of $16.6 million.

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