Dean Foods to Acquire Five Lucky Dairy Plants

The nation’s largest dairy processor and distributor, Dean Foods Co., on Monday agreed to buy the dairy businesses of American Stores Co.’s two California Lucky units for about $34 million in cash to expand its dairy network to the West Coast.

Dean Foods would acquire four dedicated fluid-milk processing plants and an ice cream plant from the Lucky businesses. It also would acquire $2 million to $5 million in inventory in the transaction.

American Stores, a food and drug retailer based in Salt Lake City, said the sale of the dairy operations would allow it to concentrate on its retail food and drugstore operations.

American Stores operates about 1,714 food markets and drugstores in 27 states. Its main businesses include Lucky Northern California Division, Lucky Southern California Division, Sav-On and Osco Drug.

The transaction also calls for a 10-year, cost-based supply agreement for Franklin Park, Ill.-based Dean Foods to provide all of the fluid-milk and ice cream products now produced in the Lucky plants. Annual sales of the products, sold under the Lucky’s brand in about 425 Lucky stores in California and Nevada, are expected to reach $250 million, the companies said.

In New York Stock Exchange trading, Dean Foods shares rose $1.13 to close at $58.75, and American Stores shares rose 31 cents to $22.06. Dean Foods plans to expand capacity at the plants and keep the Lucky’s brand, said Bill McManaman, Dean Foods’ chief operating officer. No management or labor changes are planned, he said.