Business Strategies

Saputo to Acquire Morningstar From Dean

Dec 07, 2012

Canadian dairy company Saputo Inc. will be in some new dairy categories and lengthen its reach into the U.S. with the planned purchase of Morningstar Foods LLC from Dean Foods Co. An agreement to buy the unit for US$1.45 billion was announced Dec. 3.

Not long ago a cheese-only and Canadian-only company, Saputo, based in Montreal, has been growing into other dairy sectors and other geographies. Through acquisition, it claims to be Canada’s largest snack cakes producer. And it has a growing global presence.

Morningstar produces a variety of dairy and non-dairy extended shelf-life (ESL) products, including creams and creamers, ice cream mixes, whipping cream, aerosol whipped toppings, iced coffee, half and half and value-added milks, as well as cultured products such as sour cream and cottage cheese. These products are manufactured under private labels and owned brands, and are sold in the U.S. Morningstar has approximately 2,000 employees and operates 10 manufacturing facilities located in nine states.

For the 12 months ended Sept. 30, Morningstar had revenues of about CDN$1.6 billion, and earnings of approximately CDN$153 million. The sale is expected to close by the end of December 2012. The combined business will have approximately 12,000 employees and 57 manufacturing facilities in five countries.

The acquisition of Morningstar will complement the activities of the Saputo Dairy Products Div. (USA), which began with the 1997 acquisition of American cheese-maker Stella. In 2007, Saputo acquired controlling interest in the Land O’Lakes West Coast industrial cheese business. A year later, it bought controlling interest in Wisconsin-based Alto Dairy Cooperative. And earlier this year, it landed Fairmount Cheese Holdings Inc., parent company of DCI Cheese Co., Richfield, Wis.

In the midst of some financial difficulties, Dean put Morningstar up for sale in September. Dean said it will use all net proceeds to retire outstanding term debt.