Dean Foods evaluates divestment of Morningstar Foods division

US food and beverage company Dean Foods has announced that it is considering the sale of its dairy business division Morningstar Foods, a deal which is likely to be valued at more than $1bn.

In a statement, Dean Foods said that it has not yet found a buyer for the division, but noted that the business offers an attractive portfolio in a growing marketplace and a strong management team.

The company stated that it intends to sell the Morningstar business only if it can maximise shareholder value and ensure the future success of the business.

Dean Foods has appointed investment banking advisory firm Evercore Partners to identify potential buyers, and the business has attracted interest mostly from private equity firms, reported Reuters, citing people close to the matter.

Morningstar Foods offers dairy products such as ice cream mixes, coffee creamers, aerosol whipped toppings, traditional and value-added milks, and blended iced beverages, under private labels and the Friendship brand to retailers and foodservice providers across the US.

The division reported net sales of $1.3bn in 2011, representing 10% of the company’s total sales of $13.1bn.

Dean Foods has been affected by high debts and lower profit margins over the past few years, and is seeking to divest assets to lower debt.

Headquartered in Texas, the company operates three divisions – Morningstar Foods, WhiteWave-Alpro and Fresh Dairy Direct.

In August 2012, Dean Foods announced its plans to spin-off its WhiteWave-Alpro division, which makes organic milk and soy milk.

The company plans to sell a 20% stake in its WhiteWave-Alpro division in an initial public offering that is expected to raise around $300m, and will use the proceeds of the IPO to lower debt.

Following a divestment of Morningstar and the spin-off of WhiteWave, Dean Foods will retain its Fresh Dairy Direct division, which is a leading processor and direct-to-store distributor of fluid milk.

The division is Dean Foods’ largest revenue generator with annual revenues of $9.6bn.