Colorado-based private equity firm Capitol Peak Partners and New York-based firm Kohlberg Kravis Roberts & Co. (KKR) are set to acquire “substantially all” assets of Borden Dairy Co. following a successful $340 million bid for the bankrupt dairy producer, the company announced Friday.
Capitol Peak will serve as the majority owner of Dallas-based Borden, which filed for Chapter 11 bankruptcy protection in January citing estimated liabilities of between $100 million and $500 million. KKR, an existing lender in Borden, will be a minority investor. The two owners will form a new board of directors, according to an FAQ.
Borden anticipates its approximately 3,300 employees will remain with the company and for all plants, branches, routes and brand trademarks to remain intact, according to a press release.
“Borden received strong investor interest and multiple bids throughout this sale process, which is a testament to the terrific work the people of Borden have done to build a valuable and enduring 163-year old brand,” Borden CEO Tony Sarsam said in the release. “Despite being in the midst of Chapter 11 and a global pandemic, our team managed to generate positive cash flow, grow our customer footprint and maintain an uninterrupted food supply to nourish American families.”
The deal is expected to close next month. Upon completion, former Borden controlling and majority equity holders ACON Investments and Grupo Lala will no longer have an ownership stake in the business.
According to the company, the acquisition will not impact existing supplier and customer contracts, deliveries, or inventory. Points of contact between customers and Borden are also expected to be unchanged. However, the future product innovation and marketing campaigns are currently undetermined as the new ownership focuses “on getting up to speed” on the business.
Founded in 2017, Capitol Peak Partners’ senior investment team includes a number of dairy industry veterans, including founder Gregg Engles who has previously served as chairman and CEO of both Dean Foods and WhiteWave. Other former WhiteWave executives including Ed Fugger, Kelly Haecker, Kevin Yost and Colin Murphy are also part of the team.
KKR acquired Borden in 1995 for $2 billion, but later sold off pieces of the company to various buyers. ACON Dairy Investors, LLC purchased the company in 2017.
The court approved the acquisition just two months after dairy conglomerate Dean Foods, also based in Dallas, was purchased by Dairy Farmers of America (DFA) for $433 million. The two high profile bankruptcies came as the dairy category continues to face increased competition from plant-based alternatives, as well as tightening profit margins in retail grocery. In January, Borden CFO Jason Monaco stated in an affidavit that aggregate consumption of dairy milk has fallen 6% since 2015 with more than 2,000 dairy farms going out of business over the past two years. Meanwhile, the cost of raw milk rose 27% last year.