Dean Foods to sell milk plant under antitrust deal

AP News
|
Posted: Mar 29, 2011 5:32 PM
Dean Foods to sell milk plant under antitrust deal

The nation's largest dairy company agreed Tuesday to sell a Wisconsin milk processing plant to settle an antitrust lawsuit filed by the Justice Department and three states.

The lawsuit filed last year objected to Dean Foods Co.'s 2009 purchase of two plants in Waukesha and De Pere from Foremost Farms USA. The purchase gave Dean Foods control over nearly 60 percent of milk sales in Illinois, upper Michigan and Wisconsin and raised concerns the company would quash competition and drive up milk prices. The attorneys general in those states joined the federal lawsuit.

The proposed settlement filed in federal court Tuesday calls for Dallas-based Dean Foods to sell the plant in Waukesha but doesn't affect its ownership of the one in De Pere.

The lawsuit portrayed Dean Foods' purchase of the Waukesha plant as a strategic move to eliminate a strong competitor and said it left many school districts with only one milk supplier. The company's sale of the plant will remedy that, and it will have to notify the Justice Department and Wisconsin attorney general's office before it buys another plant worth $3 million or more, Wisconsin Attorney General J.B. Van Hollen said in a statement.

"Selling the Waukesha plant will introduce another competitor capable of serving grocery stores, convenience stores, schools, and other milk retailers throughout Wisconsin," Van Hollen said.

In an e-mail, Dean Foods spokeswoman, Marguerite Copel, said reaching an agreement on the lawsuit allows the company to move forward.

"We continue to believe that our acquisition of the Foremost Farms assets in Wisconsin supported competition and benefited consumers," she wrote. "However, because ongoing litigation is expensive, distracting and brings uncertainty to our business, we believe that this resolution is in the best interest of our employees, shareholders, customers and consumers."

A federal judge has to approve the settlement.

Dairy analyst Pete Hardin, who publishes The Milkweed industry newsletter, said any competitor who buys the Waukesha plant will be at a significant disadvantage because it will be competing with a former owner with detailed knowledge of the plant's production, marketing, customers and prices.

"How that's a viable business model in a low-margin industry such as dairy has me scratching my head," he said. "Show me the competitor, and let's see if the competitor survives and can be viable before we declare victory on this one."

Bill Bruins, a dairy farmer with 600 cows near Waupun, disagreed and said anyone starting a business or buying a company has to find new customers _ that's what competition is all about. He said the settlement shows the DOJ is watching the industry and is good news for the everyday farmer.

"Farmers depend on the marketplace for their price _ for the best price _ and it's the only way we stay alive," said Bruins, who's also the president of the Wisconsin Farm Bureau.

Dean Foods has acquired more than 100 smaller companies since 1996, the lawsuit said. Its April 2009 purchase of Foremost Farms' plants was small enough that it did not have to seek prior approval from the Justice Department.

Under the proposed settlement, however, Dean Foods will have notify the state and federal governments before it buys any milk processing plant in Wisconsin or within 150 miles that's worth more than $3 million.

The 2009 deal involved Dean Foods buying the Consumer Products Division of Baraboo-based Foremost Farms. In 2008, that division had net sales of $233.7 million.

Dean Foods will have 90 days to sell the Waukesha plant, according to Van Hollen's office. If it doesn't meet that deadline, the court will appoint a trustee to sell the plant.

The settlement documents indicated Dean had revenues of approximately $12 billion in 2010.