Dean Foods Co. bested a rival to buy the Milk Products of Alabama LLC unit of Parmalat USA Corp. for $21.6 million in cash.
Judge Robert Drain of U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the sale after Dean trumped a $19.7 million stalking-horse offer from National Dairy Holdings LP, said Gary Holtzer, New York debtor counsel at Weil, Gotshal & Manges LLP.
Wallington, N.J.-based Parmalat USA, a unit of Italy's Parmalat Finanziaria SPA, had extended the bid deadline and then opened the two formal bids, selecting Dean's offer, Holtzer said.
"The auction was first adjourned (Monday); and then it was canceled (Tuesday), and then we presented the Dean offer to the court (Wednesday)," he said.
The sale is due to close by the end of the month.
"There were no objections to the sale, and the creditors committee is very pleased with the outcome," said David LeMay, New York creditors counsel at Chadbourne & Parke LLP.
Dean, the Dallas company once known as Suiza Foods, has rolled up a series of acquisitions since its 1996 IPO to make it the largest dairy producer in the United States. In 2002, it paid $189 million for White Wave, which makes the Silk brand of soy milk and earlier this year, it snapped up organic milk maker Horizon Organic for $287 million.
The buyer's EBITDA has grown an average of 24% per year between 1999 and 2003 to outpace agri-product giants Archer Daniels Midland Co., General Mills Co. and Kraft Foods Inc., records show.
Parmalat USA plans to reorganize around its Farmland Dairies LLC division and its assets in New York and New Jersey. It will detail these plans in a disclosure statement and reorganization plan due by month's end, Holtzer said.
He noted that when the committee and lenders Citigroup Inc. and GE Capital Corp. reach a settlement on recoveries, the disclosure statement and plan would be filed.
Because it loses the auction, Dallas-based National Dairy will be entitled to a $600,000 break-up fee and up to $300,000 in expenses.
Parmalat USA had planned to shop its assets at its February 24 Chapter 11 filing, but the milk maker failed to attract bids high enough to satisfy GE Capital. Despite several extensions on bid deadlines under $35 million debtor-in-possession financing from the General Electric unit, bids still fell short.
