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By Steven Ralston

Dean Foods (DF) announced today the agreement to acquire Alpro, a division of the Vandemoortele Group. Alpro is the European market leader in branded soy food products, with the brands Alpro (which targets the retail and out-of-home channels) and Provamel (which is distributed in the specialized organic health store channel). With five manufacturing sites in Belgium, the United Kingdom, France and the Netherlands, Alpro generates annual revenues of €260 million ($360 million).

Dean Foods expects the €325 million ($450 million) transaction price to be modestly accretive to 2009 earnings. The transaction is being financed under the company's existing revolving credit facility, and management does not expect the need to raise additional equity as a result of the acquisition.

Demand for soy and organic foods have increased rapidly due to growing awareness among consumers regarding the health benefits of soy and organic foods. The Dean Foods brand of Silk Soy is the leading brand of soymilk in the U.S. The acquisition of the European market leader will make Dean Foods the global leader in the soy beverages and related products category, with over $1 billion in annual retail sales.

Management sees significant opportunities to leverage the strengths of both the U.S and European businesses across a common soy platform in order to accelerate revenue and earnings growth. In addition, the shelf-stable attributes of soy products relative to milk will allow the company to expand soy products globally.

Management has taken definitive actions to improve shareholder value. In 2005 the company spun-off TreeHouse Foods, and in 2007, paid out a $15 per share special dividend. Management has focused on the branded products business, reduced SKUs, and integrated strategic acquisitions in the Dairy Group. Now with the Alpro acquisition, the company is enhancing its WhiteWave-Morningstar division.

We rate Deans Foods a Buy.