May 5, 2020

 

Dairy Farmers of America can buy dairy plants on condition

 

 

The US Department of Justice (DOJ) will only allow Dairy Farmers of America Inc. (DFA) to buy milk processing plants from bankrupt Deans Foods if DFA divests from some of its other assets engaged in the dairy sector, reported NBC15.

 

On Friday, the DOJ filed a civil antitrust lawsuit in the US District Court for the Northern District of Illinois, in order to block DFA's proposed acquisition of three fluid milk processing plants from Dean Foods.

 

The DOJ argues that DFA's acquisition of Dean's plants would lead to a loss of competition in the dairy industry.

 

However, the DOJ is also offering a potential solution. According to the lawsuit, the DOJ would approve DFA's purchase of three Dean plants if DFA also agreed to divest from plants located in De Pere, Wisconsin, Harvard, Illinois, and Franklin, Massachusetts, as well as associated equipment and other assets related to fluid milk production, to an acquirer approved by the US government.

 

The DOJ said it came to that conclusion after what it called a "fast but comprehensive" investigation into acquisitions proposed by DFA, as well as dairy cooperative Prairie Farms Dairy Inc., of Dean Food's properties.

 

The DOJ adds that its proposed solution might be a gain for workers in Wisconsin, because if DFA and others did not buy Dean's distressed plants, they would likely close for good.

 

"This is a tumultuous time for the dairy industry, with the two largest fluid milk processors, Dean and Borden Dairy Company, in bankruptcy, and a pandemic causing demand for milk by schools and restaurants to collapse," said Assistant Attorney General Makan Delrahim of the Antitrust Division.

 

"In the face of these challenges and Dean's worsening financial condition, the department conducted a fast but comprehensive investigation... In addition, the closing of the department's investigation into Prairie Farms' acquisition will preserve necessary outlets for dairy farmers and keep milk on consumers' refrigerator shelves by keeping the plants in operation," according to Delrahim.

 

 

Wisconsin Attorney General Josh Kaul said he was also satisfied with the DOJ's proposal, writing in a statement that "While strong competition in the market is always important, it's incredibly important now, as we're living through a pandemic. Our supply chain must have robust competition to ensure a continued supply of milk to those who need it."

 

DFA is a Kansas-based cooperative which has 14,000 farmer-members across the US. DFA had 2018 revenues of US$13.6 billion, the DOJ reports.

 

Prairie Farms, meanwhile, is headquartered in Edwardsville, Illinois and has over 700 farmer-members and annual revenues of over US$3 billion.

 

Dean is a Dallas-based dairy company, operating nearly 60 fluid milk processing plants in 29 states. While Dean had 2018 revenues of US$7.75 billion, in November of 2019, Dean filed for Chapter 11 bankruptcy protection and will cease to operate as a going concern in May 2020.