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Dean Foods to Spin-Off WhiteWave

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Dallas-based leading food and beverage company, Dean Foods Company (DF) recently announced its plans to allocate a portion of its remaining stake in The WhiteWave Foods Co. (WWAV) to its shareholders, later this month.

Dean Foods has received authorization to distribute 47,686,000 Class A shares and 67,914,000 Class B shares of WhiteWave on a pro rata basis on May 23 to the shareholders of record as of May 17, thus leaving the company with a minority stake. The company, which currently carries a Zacks Rank #3 (Hold), has appointed JPMorgan Chase & Company (JPM) as the financial advisor for this transaction, which has structured it to be eligible as a tax-free distribution.

On the basis of Dean Foods’ outstanding number of shares as of Mar 31, for every share of the parent company, its shareholders will get approximately 0.256 and 0.364 shares of WhiteWave’s Class A and Class B, respectively.

Per the company, Dean Foods will convert its Class B 82,086,000 shareholding in WhiteWave to Class A shares just after the business closes on May 23. Of these, 47,686,000 shares will be distributed. Dean Foods, which competes with Lifeway Foods Inc. (LWAY), will retain the remaining 34,400,000 Class A shares, which will be disposed of within the next 18 months.

Formerly, WhiteWave was a wholly-owned subsidiary of Dean Foods. Last year, Dean Foods opted for an Initial Public Offering (:IPO) to separate the maker of Silk soy products and Horizon Organic dairy products. Following the completion of the IPO, Dean Foods holds 80% controlling interest in WhiteWave.

We believe that the strategic moves will enhance Dean Foods’ shareholders’ value and present opportunities for the individual growth of both companies.

Apart from this, Dean Foods announced that it will seek shareholders approval for a reverse stock split for a minimum of 1-for-2 and a maximum of 1-for-8. The timing of the reverse stock split is yet to be decided, but it is expected to commence within one year of the completion of WhiteWave’s stock distribution.

Additionally, on May 1, Tom Davis was appointed as the Chairman of the board of Dean Foods, as Gregg Engles resigned from the post on the same day. Also, the directors, Stephen Green, Joseph Hardin, Jr. and Doreen Wright resigned from their respective posts.

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