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White Wave wants its stock back

NFM Staff

April 24, 2008

3 Min Read
White Wave wants its stock back

White Wave Inc., which claims 79 percent of the refrigerated soy milk market, has filed a complaint in a Denver federal court against its largest outside shareholder, Dean Dip and Dressing Co., a subsidiary of Dean Foods Co. of Franklin Park, Ill. The complaint alleges Dean Foods' proposed merger with Suiza Foods Corp. violates an agreement that prohibits Dean from transferring interest in its shares without first providing White Wave—and then other shareholders—an opportunity to purchase those shares. The complaint also alleges that Suiza, the Dallas-based maker of Sun Soy and Lactaid, improperly induced this violation.

Dean Dip has a 36 percent common stock stake in White Wave from shares purchased for $15 million in 1999 and 2000. The deal was made so White Wave, headquartered in Boulder, Colo., could raise capital for expansion. White Wave contends the merger will cause Dean Dip to transfer those shares to Suiza, White Wave's main competitor. Should that happen, White Wave said in a statement in June, "Suiza will have significant control rights over White Wave, including blocking rights with respect to all major corporate transactions, access to all of White Wave's proprietary information and the right to elect two of seven members to White Wave's board of directors."

Meanwhile, Dean Foods filed suit in a Chicago federal court asking the court to exempt it from the 1999 shareholders' agreement on which White Wave bases its claim to first rights to buy back its shares from Dean Dip. Dean Foods General Counsel Dale Kleber said a favorable ruling for his company wouldn't interfere with a second shareholder option that allows Dean Dip to purchase all remaining shares of White Wave at an undisclosed price in September 2002, according to the Rocky Mountain News.

Suiza would thus control the refrigerated soy milk market, and at the same time the proposed merger with Dean Foods would make it a $10 billion company controlling 35 percent of the $25 billion U.S. milk market. That's one reason why the Federal Trade Commission is scrutinizing the Dean-Suiza merger. Erika Long of JP Morgan noted the FTC has said that the fact milk is a basic staple, combined with the price sensitivity of school milk programs, may lead to a long regulatory review, the Financial Times reported. Suiza has received a second request for merger information from the Department of Justice, which prompted Scott Keller, president of, to predict the DOJ will require Suiza to sell Dean's stake in White Wave, Dow Jones News reported in July.

Last May, University of Connecticut researchers said leading supermarkets and dairy processors—singling out market-dominating Suiza—have gouged New England milk consumers by nearly $50 million since 1997, the Associated Press reported. The study hinted that the stores and Suiza raised prices in the hope consumers instead would blame a controversial price-support program designed to keep small dairy farmers in business.

"Suiza is following the approach that the best way to eliminate competition and increase market power is to buy competitors and then dismantle them," Sen. Patrick Leahy, D-Vt., said. "They end up with no competitors and tons of market power." Gregg Engles, Suiza's chief executive officer, dismissed the Connecticut study as a political sop to supporters of the dairy price-support program, the AP reported.

As for White Wave, Steve Demos, founder and chief executive officer, said: "Our agreements with Dean Dip were specifically designed to prevent a direct competitor of ours, such as Suiza, from obtaining the control over our business that they will obtain in this merger. While we are not trying to disrupt the Suiza-Dean Foods merger, we will pursue all remedies necessary to make certain that our contractual rights and our shareholders' interests are protected." White Wave sales have grown at a compound annual rate of more than 96 percent over the past four years. Sales for fiscal 2001 are expected to be $80 million, increasing to $140 million in fiscal 2002, the company said.

Natural Foods Merchandiser volume XXII/number 8/p. 1, 12

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