creditors and other potential buyers of Dean’s assets.
To overcome those objections and assuage concerns,
a shortened auction period was established, with the
deadline to submit bids for Dean set for March 30.
Dean announced DFA as the winning bidder the next
day, with DFA agreeing to pay $433 million – $8 million
more than its February offer – to acquire the assets,
rights, interests, and properties relating to 44 of the
Company’s fluid and frozen facilities. DFA’s winning bid
remained subject to final approval by the Bankruptcy
Court.
Four days later, following an April 4th hearing and citing
the need for the rapid transition of Dean assets to DFA
to protect the future of its 15,000 employees in the
weakening U.S. economy, the Court approved Dean’s
sale to DFA. While the Bankruptcy Court’s Order
closed its review of Dean’s sale to DFA, the transaction
remained subject to antitrust scrutiny.
Antitrust Regulators Approve the Deal Subject to
Certain Divestitures
Contemporaneous with Dean’s bankruptcy
announcement in November 2019, the company
had indicated that it was engaged in “advanced
discussions” regarding its eventual asset sale to
DFA. Given Dean’s status as the largest fluid milk
processor in the industry, the potential impact of the
deal immediately raised concerns about excessive
consolidation in the market, and by January 2020,
federal antitrust regulators were interviewing farmers
about the acquisition’s potential impact on competition
for their sale of raw milk. Farmers also expressed
concern about the inherent conflict between DFA’s role
in marketing farmers’ products and running its own
processing plants, which would grow even larger once
it acquired Dean’s plants. In addition, they claimed that
DFA and Dean had a history of collusion, each having
been the subject of antitrust class actions in 2007 and
2009.
According to Bankruptcy Court filings, in a letter
dated March 11, 2020, the Antitrust Division of the
U.S. Department of Justice wrote to Dean’s secured
creditors stating as follows:
“Although the Antitrust Division’s review is at
an early stage, we wish to advise you that an
acquisition of Dean by DFA appears to pose a
serious risk of anticompetitive harm that would
likely need to be addressed either through
divestitures or an injunction enjoining the
transaction if DFA and Dean are unwilling or
unable to agree to appropriate remedies needed
to protect American farmers and consumers.”
(Dkt. 1111 at 2; emphasis in original.) Dean, for its
part, explained that the proposed deal with DFA
would promote competition, benefitting both farmers
and consumers. Both Dean and DFA also provided
documents and data in response to antitrust regulators’
requests. Yet even after Dean’s APA with DFA was
subsequently approved by the Bankruptcy Court, some
farmers, stakeholders and shareholders expressed
hope that their concerns over competition would cause
antitrust regulators to block the deal.
On May 1, 2020, less than a month after the Bankruptcy
Court’s Order approving Dean’s sale to DFA, the
U.S. DOJ, in conjunction with the offices of the
Massachusetts and Wisconsin attorneys general,
announced the conclusion of their investigation into the
proposed acquisition. The regulators would require the
divestiture of three plants, while allowing the balance of
the transaction to go forward as planned.
According to allegations in the regulators’ Complaint, if
DFA had acquired the three plants in question, the deal
would have reduced the options for milk consumers
from three to two in the relevant geographic markets,
with DFA occupying 70 percent of the market in
northeastern Illinois and Wisconsin, and more than 50
percent in New England. The government also alleged
that fluid milk’s high transportation costs and limited
shelf life meant that DFA would have been the only
remaining milk processing option for customers in
portions of these geographic areas, making a merger
involving these three plants presumptively unlawful. In
addition, the government expressed concern about the
history of anticompetitive coordination in the industry,
making further coordination allegedly more likely to
occur in these markets post-merger. As a result, the
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