The company’s shares have fallen from $6.27 last December to 80 cents on Wednesday, when it applied to a court in Texas for protection.
On its website the firm said it intends to use the voluntary reorganisation proceedings in the court to protect and support its ongoing business operations and address debt and unfunded pension obligation while working on an orderly and efficient sale.
In September, when a strategic review was completed, the firm said it had decided not to sell.
It said it is in advanced discussions with Dairy Farmers of America regarding a sale of substantially all its assets.
During the process it is operating as normal, continuing to provide customers with an uninterrupted supply of dairy products and supporting suppliers.
The process involves the main company Southern Foods Group, which trades as Dean Foods, and 42 subsidiary companies. Dean Foods sells products under more than 50 brands in Amereica.
Dean Foods has received a commitment of US$850 million in financing from some of its existing lenders, led by Rabobank.
If it gets court approval it intends to use the money together with cash on hand and operating cash flows to support its continued operation throughout the sale process, including paying wages to its 15,000 staff suppliers and vendors in full under normal terms for goods and services provided on or after the filing date.
“The actions we are announcing today are designed to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” the recently appointed president and chief executive Eric Beringause said.
“We have a strong operational footprint and distribution network, a robust portfolio of leading national brands and extensive private label capabilities.
“Despite our best efforts to make our business more agile and cost-efficient we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption.
“Since joining the company just over three months ago I’ve taken a hard look at our challenges as well as our opportunities and truly believe we are taking the best path forward.
“In recent months we have put in place a new senior management team that not only has considerable experience in the dairy and consumer product industries but also in executing major turnarounds.”
As well as persuing the sale the company is also working with creditors to explore a potential stand-alone reorganisation plan, Beringause said.
The firm was started in 1925 by Samuel Dean at a single site in Illinois. Today its milk from 930,000 cows is processed at 66 factories in 32 states. It has 8000 refrigerated delivery trucks on the road every day.
Its net debt on June 30 was US$968m. Its market capitalisation on Monday was US$73.5m.
The company has attributed its declining fortunes to a steady fall in milk consumption over the last two decades coupled with the rise in milk alternatives and pressure on margins with inflation in bulk milk prices while retailers are discouting dairy products as consumers also show resistance motivated by environmental sustainability concerns.
It has also lost big customers, such as Walmart, which decided to set up its own processing plant.
Dairy Farmers of America is a national milk marketing co-op owned by 14,000 farmers. It makes consumer cheese and butter products as well as dairy ingredients and is a contract manufacturer for consumer products. It also supplies bulk milk to other companies including Dean Foods. It has 47 processing plants.
