Dean Foods committee says sale could bring administrative insolvency

By Caroline Salls

Pittsburgh, March 10 – Dean Foods Co.’s official committee of unsecured creditors objected to the company’s motion for approval of its asset sale procedures and stalking horse purchase agreement, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

“The debtors seek approval of off-market bidding procedures and bid protections intended to facilitate the sale of substantially all of the debtors’ assets to Dairy Farmers of America pursuant to the terms of a bid best described as a one-way option in DFA’s favor,” the objection said.

“The proposed sale – if, in fact, DFA elects to close – reflects DFA’s desire to acquire substantially all of the debtors’ assets for as little consideration as possible, while simultaneously stifling the debtors’ ability to locate and consummate higher and better bids and/or pursue an alternative value-maximizing transaction.”

Because of the company’s apparent focus on obtaining a bid from DFA, the committee said indicative interests and bids on a regional or business-line basis are less developed than the DFA bid, even though they may provide greater value to the Dean Foods debtors’ estates to the extent bidders are provided with the time and information necessary to finalize their bids.

In addition, the committee said the proposed sale to DFA will likely render the company’s estates administratively insolvent, is subject to significant regulatory approvals that may never be obtained and is subject to numerous purchase price deductions that will result in these estates actually receiving far less than the $425 million purchase price.

Specifically, the committee said the DFA purchase agreement calls for a straight dollar-for-dollar purchase price deduction for amounts required to cure DFA’s own contracts, an amount estimated to be $104 million.

Additional as-of-yet unquantified cure costs that Dean Foods is required to pay, together with a proposed $55 million purchase price holdback and other purchase price adjustments, will reduce the net “purchase price” still further, likely to less than $200 million, according to the objection.

Dean Foods is a Dallas-based food and beverage company. The company filed bankruptcy on Nov. 12 under Chapter 11 case number 19-36313.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.