The largest US milk cooperative has reached an agreement to purchase “a large portion” of the troubled Dean Foods company, the two parties announced on Monday.
Under the agreement, the cooperative, Dairy Farmers of America, will pay $ 425 million to purchase 44 Dean Food facilities, in addition to the real estate, inventory and equipment needed to operate them. But the deal must be approved by the bankruptcy court that oversees Dean Food as well as government antitrust agencies.
The American Dairy Farmers company was founded to help small farmers market raw milk to dairy manufacturers such as Dean Foods, which prepares milk for distribution to retailers.
Over the years, the cooperative has also invested heavily in processing, which means it buys some of the raw milk it sells to its marketing branch. Some dairy farmers argue that these investments have created a struggle, because processors benefit from lower milk prices, while farmers benefit from higher prices. Potential merger critics say the Dean Foods purchase will expand cooperative processing operations significantly, further increasing conflicts of interest.
American dairy farmers have been discussing a possible purchase for Dean Foods since the dairy company Filed for bankruptcy protection in November. The discussions have drawn criticism from dairy farmers, who argue that the merger would lower competition and halt the price of raw milk.
Since at least December, Justice Department antitrust officials have been investigating a possible merger, as they speak with farmers and the lawyers they represent about how the deal affects milk pricing and competition.
In January, a department attorney sent an email to farmers who sold raw milk to Dean Foods, asking him to discuss a possible merger over the phone.
“We are investigating the possibility of Dairy Foods obtaining Dean Foods and the possibility of losing competition to sell raw milk,” the letter said, according to a copy reviewed by the New York Times.
Not all dairy farmers are opposed to a possible merger. Some argue that it will help farmers because it will ensure a stable market for their milk at a time when milk consumption is decreasing nationwide.
“It is important to ensure continued safe markets for our members’ milk and a minimum of turmoil in the American dairy industry,” Rick Smith, CEO of Dairy Farmers of America, said in a statement released on Monday.
Dairy Farmers of America is facing a federal lawsuit in Vermont accusing the cooperative of engaging in a wide range of anti-competitive practices over the years, including concluding deals with other cooperative companies rather than hunting each other’s members and exchanging milk prices information to curb payments to farmers.
The cooperative denied these allegations. But in September, the judge overseeing the case allowed her to go to trial, and wrote in her decision that the plaintiffs provided evidence from which a rational jury could conclude that the Financial Affairs Department. The administration preferred the growth of its business operations and the building of its empire over the interests of its farmer members. “