Shares in dairy, beverage and foods maker Dean Foods Co (NYSE:DF) vaulted higher Friday after a report in the Financial Times said a large Chinese beverage maker may be lining up a bid for the US company.
The DF stock leaped 10.72% higher to close the day at $18.49, on humongous volume of 12.68 million shares, more than 7X the average volume of 1.76 million.
Technically, Dean Foods’s Friday rally also pierced the significant 200-day moving average, an indicator that the long term momentum may have turned positive.
Further confirmation of this will be obtained if the stock closes above the $19 and $19.75 levels.
Dean Foods Co (NYSE:DF) a Chinese acquisition target?
In 2013, Dean Foods completed the spin-off of WhiteWave Foods. In 2016, French company Danone, the world’s largest yoghurt company, acquired WhiteWave Foods for $12.5 billion.
The rest of Dean Foods, indeed the company itself, may now end up in Chinese hands, according to an article in the FT.
According to the FT article, China’s Hangzhou Wahaha Group has sounded out bankers in Hong Kong for financing a buyout of Dean Foods. The article also said that one of the Group’s subsidiaries had approached international banks (including Goldman Sachs) for financing the bid, as well as talked to a few private equity players for participating in the bid.
Hangzhou Wahaha Group is one of China’s biggest beverage producers. Milk and cheese products from Dean Foods are sold throughout the US.
Dean Foods Co (NYSE:DF): Chinese company fishing in troubled waters?
According to the Wall Street Journal, American dairy farmers dumped 43 million gallons of excess milk during the first eight months of 2016, in the face of a supply glut and falling prices.
The WSJ also said in May that an oversupply of milk had forced its conversion into cheese and that a cheese glut was overtaking America. Meanwhile, the strength in the dollar had made the export of these commodities unviable.
Wahaha’s product line-up includes milk.
Dean Foods lost a 100 million gallons milk contract at Wal-Mart when the retailer decided to start its own milk processing facility. According to analysts, Dean Foods will continue to feel the heat from falling sales volumes of milk.