Along with greatly improved second quarter results, Dean Foods Co. on Aug. 7 announced it would spin off part of its WhiteWave-Alpro segment, which makes soy milk, into a new company, WhiteWave Foods Co.
Gregg Engles will remain chairman of Dean Foods even as he becomes chairman of the new company, but he will relinquish his CEO duties at Dean to become CEO of WhiteWave. Gregg Tanner, president of Dean’s Fresh Dairy Direct segment and chief supply chain officer, will be promoted to CEO of Dean Foods.
The Dallas company, the world’s biggest producer of fresh milk, said it filed a registration statement with the Securities and Exchange Commission to offer up to 20 percent of the new company as common stock. Dean would retain the rest. Proceeds from the offering, as well as $800-925 million to be borrowed under a new credit facility at WhiteWave, are expected to be applied to reduce Dean Foods' outstanding debt. As a result, management expects Dean Foods' leverage ratio to decline to approximately 3.5x debt to EBITDA, assuming a closing by the end of this year.
The company reported second quarter consolidated operating income of $146 million, compared to a consolidated operating loss of $16 million in the second quarter of 2011. Sales for the second quarter totaled $3.1 billion, compared to $3.3 billion in the second quarter of 2011, reflecting the pass-through of lower dairy commodity costs.
Deans’ first quarter was good, too, with a $60 million operating profit on sales of $571 million. The company recorded a net loss of nearly $1.6 billion in 2011.
CEO-to-be Tanner has more than 30 years of food industry experience with companies including Hershey, ConAgra Foods, Quaker Oats and Ralston Purina. He’s been leading Dean’s Fresh Dairy Direct and supply chain organization over the past five years.
Although it’s only a partial spin-off, Dean joins a hoist of food companies splitting in two, including Fortune Brands, Ralcorp, Sara Lee and soon Kraft.