(Adds closing price, KKR as bidder for Morningstar)
By Martinne Geller and Olivia Oran
Oct 26 WhiteWave Foods Co shares
received a lukewarm reception on Friday in their New York Stock
Exchange debut, closing narrowly below their offering price.
Shares of Dean Foods Co spin-off closed at $16.75
after pricing at $17 on Thursday evening. They opened at $19.
WhiteWave sold 23 million shares in an upsized deal, raising
$391 million. The company, which sells Silk soy milk and Horizon
organic dairy products, had expected to sell 20 million shares
within a range of $14 to $16 per share.
"WhiteWave is at the forefront of on-trend categories," said
Gregg Engles, the chief executive of Dean Foods, who is now
Dean Foods, based in Dallas, Texas, said in August that it
was spinning off its WhiteWave segment. The company also
confirmed in September that it was looking for a buyer of its
Morningstar division, which sells Friendship cottage cheese and
private label dairy products such as creamers and ice cream mix.
Reuters reported late on Thursday that Mexico's Grupo Lala,
Michael Foods and Apollo were eyeing the Morningstar business,
which could be valued between $1 billion and $1.5 billion.
Morningstar has also drawn buyout interest from private
equity firm KKR & Co LP, two people familiar with the
matter said on Friday. KKR did not immediately respond to
requests for comment.
In an interview on Friday, Engles said the Morningstar sale
process was "moving along."
Shares of Dean Foods, which would sell mostly milk following
the spin-off of WhiteWave and a sale of Morningstar, closed down
11 percent at $16.74 on Friday on the New York Stock Exchange.
Morningstar analyst Erin Lash said the market could be
concerned about Dean becoming a fluid milk business sooner
rather than later. That business has been squeezed in recent
years by higher dairy costs, the weak economy and cheaper
private label brands.
Passing on higher commodity costs is difficult in the milk
business because there is little brand loyalty and consumers
often choose the cheapest brand.
WhiteWave's margins are better since its products have brand
power, Engles said, adding that its brands and margins should
make it attractive to investors.
"Fundamentally, the portfolio of brands in WhiteWave are
some of the most important and good brands in the natural
products space," said Lou Marinaccio of North Castle Partners, a
private equity firm focused on companies in the health and
Natural and organic products have been a bright spot for
packaged food and drink makers as they seek to harness
consumers' growing interest in healthy eating.
Analysts have said that WhiteWave could be an attractive
target for other food or beverage companies, including the likes
of PepsiCo and Coca-Cola.
Engles said that Dean had briefly considered selling
WhiteWave but tax issues made a spin-off more logical.
Aside from continuing to focus on organic growth of its
brands, WhiteWave would be open to acquisitions, even outside of
its core categories, Engles said.
Dean Foods is selling a 12 percent stake in the WhiteWave
unit. The remaining 88 percent of shares might be transferred to
Dean Foods stockholders via a tax-free transaction, WhiteWave
said earlier in October.
WhiteWave's IPO comes after the success of other recent
offerings from organic foods companies, including Annie's Inc
and Natural Grocers by Vitamin Cottage Inc.
Annie's shares have more than doubled since the company's
March IPO. On Friday they closed at $39.50. Shares of Vitamin
Cottage, which priced at $15 in July, closed at $20.32 on
WhiteWave's net sales rose 12 percent from the year prior to
$1.9 billion in 2011.
WhiteWave Foods said it would use the proceeds of the
offering to pay back debt owed to Dean Foods.
Underwriters for WhiteWave's IPO include J.P. Morgan, Credit
Suisse and Bank of America Merrill Lynch.
(Reporting By Olivia Oran and Martinne Geller in New York;
Additinal reporting by Soyoung Kim; Editing by Gerald E.
McCormick and Phil Berlowitz)