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Suiza buying Dean Foods
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April 5, 2001: 8:44 a.m. ET
Dairy products producer sets $1.5B cash and stock offer for rival
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NEW YORK (CNNfn) - Suiza Foods Corp. has agreed to buy rival Dean Foods Co. for about $1.5 billion in stock and cash, plus the assumption of nearly $1 billion in debt, the companies said Thursday.
The purchase will create a company with about $10 billion in annual sales, solidifying Suiza's leadership in the dairy industry.
Suiza is offering $40.92 a share for Dean, including $21 a share cash and 0.429 of a share of Suiza stock, a 26-percent premium based on Wednesday's closing price of $32.50, the companies said.
Dean stock hit a 52-week high of $38.50 on March 9 after the company issued a profit warning but said it had hired Goldman Sachs to "explore strategic and financial alternatives."
 The deal is expected to be completed in the third quarter. The merged company will carry the Dean Foods name.
Dean Foods Chairman and CEO Howard Dean will serve as chairman of the merged company and Suiza Foods Chairman and CEO Gregg Engles will be CEO, and will become chairman on Dean's retirement.
The takeover could raise antitrust issues, however, according to the Wall Street Journal, which first reported the deal Thursday. In the $25 billion U.S. fluid-milk market, Suiza (SZA: down $1.19 to $45.25, Research, Estimates) currently has a 20 percent share and Dean (DF: up $5.80 to $38.30, Research, Estimates) has 14 percent, John McMillin, food analyst for Prudential Securities, told the paper.
Any deal combining the No. 1 and No. 2 companies in an industry is sure to prompt scrutiny, but the companies overlap heavily in only a few markets, such as Michigan, Indiana and parts of the South, McMillin said.
To mitigate this, Suiza has agreed to repurchase the 33.8 percent stake in Suiza Dairy Group owned by the Dairy Farmers of America Inc. (DFA) for approximately $165 million cash and the operations of six plants located in five states where Suiza and Dean Foods overlap.
Engles stated, "We carefully analyzed the areas of overlap and identified these operations to resolve potential regulatory concerns and ensure that approval for this pro-competitive transaction is secured in a timely manner." 
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