Dean Foods Buys Friendly’s Ice Cream for $155 Million

The largest dairy processor in the U.S., Dean Foods Co, agreed on Tuesday to buy both the Friendly’s Ice Cream manufacturing as well as retailing operations for just over $155 million, which adds another consumer brand to its lineup and helps build the business beyond its fresh milk.

This deal will include the intellectual property and trademark of Friendly’s, said Dean, which is based in Dallas. The company will keep the senior management group of Friendly’s

It does not include the chain of over 260 Friendly’s restaurants, those will remain owned as well as operated by a Sun Capital Partners affiliate, which will license the Friendly’s trademark from Dean.

This acquisition should add close to 6 cents per share to the earning for 2016, said the Dean statement. Dean reported on Tuesday, earnings for the first quarter that were better than had been expected as well as a profit forecast for its ongoing quarter that exceeded expectations on Wall Street.

While the most recent decline in the prices of raw milk has helped the margins for Dean in its processing business, the business is looking for additional new markets as well as products to adapt the decline over the long term of per capita U.S. consumption of milk.

During 2011, TruMoo was introduced by Dean, which is a flavored brand of milk and in 2015, the company started to sell the milk brand DairyPure to counter growth of almond- and soy-based substitutes and organic milk.

Dean said during February it would re-enter the market of iced-coffee.

Net income for the first quarter reached 43 cents per share in comparison to 78 cents per share net loss for the same period one year ago.

Earnings eliminating one-off items reached 45 cents per share, which exceeded the Wall Street expectations of 38 cents. Dean forecast in February a range of between 32 cents and 42 cents.

Sales were down ending the quarter at $1.88 billion compared to over $2.05 billion for the same period last year, but matches the estimates on Wall Street.

Raw milk costs’ measure Class I Mover, fell by 14% during the quarter, said officials at Dean. It had forecast that earnings for the second quarter would be between 32 cents and 40 cents as the costs of milk drop 15%. The midpoint of the projection is higher than the estimates of Wall Street for 35 cents.

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David Glass

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