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KKR, Former Dean Foods CEO Win Auction for Borden Dairy

Jeremy Hill and Isis Almeida

(Bloomberg) -- KKR & Co. teamed up with a firm led by the former head of Dean Foods Co. to win an auction for bankrupt Borden Dairy Co., putting KKR back in the milk business it gave up years ago.

Borden said in court papers that New Dairy Opco LLC won an auction for substantially all of its assets. That entity is a joint effort between Capitol Peak Partners, headed by Gregg Engles, and KKR, according to a person with knowledge of the matter, who wasn’t authorized to comment publicly. Capitol Peak is leading the bid, the person said.

The purchase price wasn’t disclosed yet, and the sale still needs bankruptcy court approval. KKR and Borden declined to comment. Capitol Peak didn’t respond to a phone message and email.

Capitol Peak was founded in 2017 by Engles, the long-time chief executive of dairy giant Dean Foods, which he built through a series of acquisitions. Toward the end of his career at Dean, Engles presided over the spinoff of WhiteWave Foods -- which included the plant-based Silk brand and Horizon Organic --and took over as chief executive, ultimately leaving Dean in 2013. He then sold WhiteWave for $12.5 billion to Danone SA in 2017.

Credit Bid

KKR’s credit arm is a high-ranking creditor in the bankruptcy case and has offered to use its debt holdings to buy Borden, court papers show.

Borden filed for bankruptcy in January as the dairy industry was losing ground to alternatives like soy and almond milk. The pressure was so intense that Dean Foods also filed for bankruptcy within the last year and sold itself to Dairy Farmers of America.

“Borden and Dean Foods are iconic dairy brands, and both have landed in strong, seasoned industry hands,” said Mary Ledman, global dairy strategist at Rabobank, noting that Engles bought up milk assets including Horizon Organic and Silk soymilk while at Dean. “It will be interesting to see if he replicates this playbook under the Borden brand.”

KKR bought Borden Inc. in 1995 for $2 billion and in subsequent years sold off many of its divisions and brands to various buyers, according to court papers. Now KKR is a lender under Borden Dairy’s $175 million Term Loan B, according to court papers, meaning it’s near the front of the repayment line in bankruptcy and holds a lot of sway over the proceedings.

A hearing to approve the sale is scheduled for June 18.

The case is Borden Dairy Co., 20-10010-CSS, U.S. Bankruptcy Court for the District of Delaware.

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