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Dean Foods Furthers WhiteWave Spin-Off

Zacks Equity Research

The spin-off of The WhiteWave Foods Co. (WWAV) from its parent company, Dean Foods Company (DF), reached the final stages as the former filed a secondary offering of its Class A shares with the U.S. Sec authorities on Friday.

As a part of the offering, 29.9 million of WhiteWave’s Class A shares that are currently held by Dean Foods will be issued to the public, diluting the latter’s stake in the former. Additionally, the offering provides the underwriters an option to buy the remaining 4.5 million Class A shares held by Dean Foods in 30 days.

Prior to the offering, Dean Foods will exchange some of WhiteWave’s Class A shares with certain underwriters, to relieve of its indebtedness. Following the completion of the offering, the underwriters will be allowed to sell these shares.

The debt-for-equity offering has been formulated in a manner that makes it eligible for a tax-free transaction. After completion of this transaction, Dean Foods will not have any stake in WhiteWave.

WhiteWave has appointed J.P. Morgan Securities LLC, BofA Merrill Lynch, Credit Suisse Securities LLC, SunTrust Robinson Humphrey and Wells Fargo Securities to be joint managers for the offering. Moreover, Credit Agricole CIB and Rabo Securities will be the co-managers.

Formerly, WhiteWave was a wholly owned subsidiary of Dean Foods. In Oct 2012, in order to relieve debts, Dean Foods decided to separate the Silk soy products and Horizon Organic dairy products subsidiary through an Initial Public Offering (:IPO) and consequently diluted its 20% stake in WhiteWave.

Since then, this Zacks Rank #3 (Hold) company has been continuously reducing its stake in WhiteWave. Dean Foods, which competes with Lifeway Foods Inc. (LWAY) and Feihe International, Inc. (ADY) distributed 47,686,000 Class A shares and 67,914,000 Class B shares of WhiteWave on a pro rata basis last month.

We believe that these strategic moves will boost the company’s shareholder value and offer growth opportunities for both Dean Foods and WhiteWave.

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