US dairy giant Borden Dairy has announced the start of a new chapter, with Capitol Peak Partners and its affiliates acquiring substantially all Borden assets following completion of a court-supervised sale process. Capitol Peak will assume majority ownership of the new company, and KKR, an existing lender to Borden, will be a minority investor.

Following the transaction, Borden will be appropriately capitalized, and the business will remain intact, including all plants, branches, routes and the Borden brand. The newly reorganized Borden will be able to continue employment for approximately 3,300 Borden employees and service for Borden customers.

"Borden received strong investor interest and multiple bids throughout this sale process, which is a testament to the terrific work the people of Borden has done to build a valuable and enduring 163-year-old brand," says Borden CEO Tony Sarsam. 

"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. We are exiting Chapter 11 as a thriving company that is meeting and exceeding its performance forecasts, making our outlook very promising." 

Dallas-headquartered Borden initiated voluntary reorganization proceedings on January 5, 2020, to pursue a financial restructuring designed to reduce its current debt load, maximize value and position the company for long-term success. 

At the time the company said that it continued to be impacted by the rising cost of raw milk and market challenges facing the dairy industry, and that these challenges contributed to making Borden’s current level of debt unsustainable. 

The difficult environment for milk producers includes decreasing demand for milk, increased competition with non-dairy alternatives, the growth of discount grocery retailers and the growth of private label alternatives.

A court-supervised process to protect the company
Following talks with lenders to evaluate the potential strategic plans for the company, Borden decided at the start of 2020 that the best way to protect the company was to reorganize through a court-supervised process. 

The court has now approved the approximately US$340 million sale. Upon closing of the transaction, Borden’s former controlling and majority equity holders, ACON Investments and Grupo Lala will no longer have ownership interest in the business. Capitol Peak and KKR will establish a new board of directors.  

“Borden has a rich history of partnering with US dairy farmers and leading retailers to provide wholesome nutrition for US consumers and families,” says Capitol Peak’s Founder and Managing Partner Gregg Engles, who brings extensive dairy industry experience as the former Chairman and CEO of both Dean Foods and WhiteWave Foods. “The Capitol Peak team is excited by this unique opportunity to work alongside KKR and build this iconic dairy company.”

Throughout its reorganization process and the COVID-19 pandemic, Borden has upheld its high level of service to customers, notes the company. Last month, the US Department of Agriculture awarded Borden the largest contract through its Farmers to Families Food Box Program as part of the Coronavirus Farm Assistance Program. The contract enables Borden to supply 700 million servings of fresh fluid milk for free to qualifying 501(c)3 organizations across the country.  

“We are pleased to join Capitol Peak in supporting Borden and its many dedicated employees through a restructuring that cleans the slate for Borden to start a new chapter,” adds KKR Managing Director Lauren Krueger.

The transaction, which is subject to certain closing conditions, including the entry of a final order, is expected to be finalized in mid-July.