Dean Foods to sell Morningstar Foods division to Saputo

DALLAS — Dean Foods has entered into a definitive agreement to sell its Morningstar Foods division to Saputo for $1.45 billion.

Morningstar Foods is a manufacturer of dairy and nondairy extended-shelf-life 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.

Gregg Tanner, CEO of Dean Foods, said that Dean Foods will use substantially all of the net proceeds from the sale to reduce outstanding debt and increase its flexibility to execute against its strategies for the core dairy business. As a result of the transaction, Dean Foods expects to realize $887 million in proceeds, net of taxes and expenses.

Assuming a fourth-quarter close, Dean Foods' management expects its net debt to EBITDA ratio, as defined by its credit agreements, to be below 3.0x at year-end 2012.

As a condition of the sale, Dean Foods also entered into an agreement with WhiteWave Foods, a controlled subsidiary of the company, whereby WhiteWave will receive $60 million net of taxes as consideration for the termination of an option to purchase 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.

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