Dean Foods Co reported strong preliminary results for its WhiteWave Foods business and said the unit's upcoming initial public offering should raise as much as $320 million, sending Dean shares up more than 13 percent.
WhiteWave will offer 20 million Class A common shares for between $14 and $16 per share, Dean - the top U.S. dairy company - said in a filing with the Securities and Exchange Commission on Wednesday.
At the midpoint of the expected range, WhiteWave would be valued at about $2.55 billion.
Dean also said on Wednesday it will sell about 12 percent of the unit in an IPO and would retain 88 percent economic interest after the listing. Dean may then later transfer all or a portion of its remaining stake to shareholders through a tax-free spin-off.
The company said in August that it planned to sell up to 20 percent of WhiteWave in an IPO. In September, it confirmed a Reuters report saying it was also looking for a buyer for its Morningstar dairy division.
WhiteWave sells Silk brand soy milk and Horizon Organic dairy products, which analysts have said position the company well to take advantage of consumer trends toward healthier eating.
In the latest quarter, sales in Dean's WhiteWave-Alpro segment rose 13 percent to $598 million, while operating income rose 22 percent to $64 million, Dean said.
The unit's established brands make it an attractive asset for institutional investors, according to Francis Gaskins, president at IPODesktop.com.
"Institutions like established brands and these are all established brands, and it's hard for competitors to establish an equivalent brand in this market, so there is top line visibility," Gaskins said.
Following the IPO, Dean will not own any Class A common shares but will own all of its Class B common stock and will have almost full control of voting rights in WhiteWave.
Each Class B common share will have 10 times the voting power of a Class A share.
A dual-class equity structure, also used by companies like Facebook Inc and Manchester United, will allow Dean Foods maintain a strong control over the unit even after it goes public.
WhiteWave will repay debts owed to Dean Foods using the IPO proceeds and a $1.35 billion credit facility it entered into last week.
Dean Foods shares were last up $1.82, or 12.1 percent, at $16.86 in late afternoon trade on the New York Stock Exchange.
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