Saputo to Acquire Morningstar from Dean Foods (DF) in $1.45B Deal

December 3, 2012 8:28 AM EST Send to a Friend
Saputo Inc. announces today that it has signed a definitive agreement to acquire Morningstar Foods, LLC ("Morningstar"), a subsidiary of Dean Foods Company. Morningstar produces a variety of dairy and non-dairy extended shelf-life ("ESL") products, including creams and creamers, ice cream mixes, whipping cream, aerosol whipped toppings, iced coffee, half and half, value-added milks, as well as cultured products such as sour cream and cottage cheese. These products are manufactured under a wide array of private labels and owned brands, and are sold nationwide through an internal sales force and independent brokers. Morningstar serves the needs of retailers, national quick-serve restaurant chains, grocery stores, mass merchandisers and distributors across the United States. Morningstar has approximately 2,000 employees and operates 10 manufacturing facilities located in nine states.

The purchase price for the transaction is US$1.45 billion on a debt-free basis and will be financed through a newly committed bank loan. The transaction is subject to customary conditions (including regulatory approval) and is expected to close by the end of December 2012.

For the twelve months ended September 30, 2012, Morningstar had revenues of about CDN$1.6 billion, and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately CDN$153 million.

The transaction will be treated as an asset transaction for tax purposes pursuant to a 338(h)(10) election. After giving effect to the benefit related to that election, the net purchase price represents for Saputo Inc. a multiple of 7.9x Morningstar's EBITDA.

Saputo Inc. ("Saputo" or "the Company") expects the transaction to be immediately accretive to earnings. After giving effect to the acquisition, the combined business of Saputo and Morningstar for the twelve months ended September 30, 2012, on a pro forma basis and taking into account interest on the new bank loan, would have had approximately CDN$8.6 billion of revenues, CDN$1.0 billion of EBITDA, and CDN$563 million of net earnings1, representing CDN$2.82 of basic earnings per share1 ("EPS"), equivalent to an increase of 11.5% over the Saputo stand-alone basic EPS(1) of CDN$2.53 for the twelve months ended September 30, 2012.

The combined business will have approximately 12,000 employees and 57 manufacturing facilities in five countries.

The acquisition of Morningstar will complement the activities of the Saputo Dairy Products Division (USA). Through this acquisition, Saputo will benefit from Morningstar's national manufacturing and distribution footprint and will optimize coast-to-coast service. This transaction will expand product offering to customers in the United States and broaden the range of Saputo's future acquisition opportunities.


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