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Dean Foods Company Message Board

  • valueputter valueputter Oct 24, 2012 3:41 PM Flag

    What will happen to the Morningstar Division?

    While everyone is getting pumped up about White-Wave being spun off, has anybody thought of what will happend to the Morningstar Division? Obviously can't beat generics in a price war, but still a 9B Revenue per year business. There a chance that everyone will bid up White-Wave because of the excitement around it, and DF's price will be depressed? Possible acquisition target?

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    • Morningstar is being shopped. It will only be sold if DF believes its getting fair value for it. Numerous sources have indicated that to be around $1B.

      WhiteWave will be bid up because its growing so fast in some cases it can't meet demand internally. That will be fixed with the new Dallas plant that is ramping up.

      DF itself will own over 80% of WWAV after Friday's IPO. If WWAV is bid up as you speculate, it only makes sense DF will do well. Especially since the Class B shares owned by DF (and eventually distributed to the DF shareholders next summer) will have 10 times the voting rights of the Class A shares offered in the WWAV IPO.

      By next summer, DF's debt load will be considerably lower than it is now. How much lower we shall see depending on what transpires. Since DF's interest expense will be greatly reduced, its very possible a dividend will be initiated.

      When thinking of a company break-up such as this, its best to focus on the sum-of-the-parts. I think in DF's case its the mid-$20's.

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