Texas-based Dean Foods mum on rumours of A2 takeover

Wednesday 24th June 2015

Texas based food and beverage company Dean Foods is keeping quiet on Australian media reports linking it to the proposed takeover of A2 Milk Co.

The Australian Financial Review's Street Talk column yesterday named Dean Foods as the second party in a consortium seeking to buy A2 Milk, providing an alternative route for the company, which markets milk with a variant protein, to expand in the US. The AFR speculated the bid could be as much as $2 a share, a massive premium to A2 Milk's share price of 57 cents before potential takeover became public.

Dean Foods spokesman Jamaison Schuler told BusinessDesk in an emailed statement that company policy is to "not comment on market rumors or speculation about our company."

A2 Milk shares climbed to a year high 77 cents today, and were recently up 7 percent at 76 cents.

On Monday, the company said it's facing a takeover from two unnamed parties, one of which was later revealed as its cornerstone shareholder, Freedom Foods. Initial reports speculated New Hope Group was the other party in the deal, due to the Chinese firm's existing relationship with ASX listed Freedom.

Freedom Food shares, which are majority owned by the Perich Group, have gained 7.1 percent since the A2 Milk announcement, closing at A$3 on the ASX yesterday.

A deal would be contingent on the consortium, which includes an "unnamed leading international liquid dairy milk company", undertaking due diligence. It also has a restriction on A2 Milk changing the number of shares on issue, effectively scotching a planned equity raising that has been in the pipeline.

A2 Milk’s board is seeking further information in order to evaluate the proposal before updating the market and said no further comment would be made at this time.

Freedom Foods is represented on A2 Milk's board by Mervyn Miles, while managing director Geoff Babidge, general manager international development Simon Hennessy, and chief executive Australia and New Zealand Peter Nathan are also alumni of the ASX listed firm.

When A2 Milk listed on the ASX earlier this year it didn’t include a capital raising despite a three year US$20 million launch into the US market with fresh milk.

The company markets its products as potentially beneficial for people who suffer intolerance to the naturally occurring A1 protein in milk, including bloating and stomach pain. A2 Milk has captured some 9.3 percent of the Australian fresh milk market by selling milk that only has A2 protein.

BusinessDesk.co.nz

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