Melody Farms Changes Hands, Crain’s Detroit Business, June 23, 2003

Date: June 23, 2003 Publication: Crain’s Detroit Business Author: STRONG, MICHAEL

Melody Farms L.L.C., a prominent dairy products company built by businessman Michael George, was sold last week to Dallas-based Dean Foods Co. Terms were not disclosed.

Rodney George, Melody Farms president and CEO, confirmed the sale was completed to Dean Foods (NYSE: DF). But he declined to comment whether the family will have a role in the company or if changes will take place within the company.

He referred all questions to Dean Foods. Amy Barker, director of corporate communications for Dean Foods, said she could not confirm the sale.

Ed Eberle, president of Seizert Hershey & Co. L.L.C., an investment-research firm in Bloomfield Hills, estimated the acquisition price between $40 million and $50 million. He said the deal probably included a mix of cash and stock because Dean Foods “only has $26 million in cash on its balance sheet.”

Melody Farms ranked No. 91 on Crain’s list of the top 200 privately owned companies. The company reported revenue of $117 million in 2001 and $121 million in 2002.

Livonia-based Melody Farms is a family-owned company founded by Tom George in 1950 as Tom George & Sons Dairy Distributors. The company began by selling and delivering milk from the Wilson Dairy to three customers, with George hoping for $1 million in sales some day.

With time, a few name changes and three generations of Georges at the helm, Melody Farms grew into a producer of milk, ice cream, other dairy foods, bottled water and fruit juice. The company has some of the most recognized products in metro Detroit, including Stroh’s and Sanders ice creams.

Michael George and the George family’s influence extend well beyond delivering milk and making ice cream. They are a fixture in the Chaldean community in the Detroit area, including helping to found the Chaldean Iraqi Association of Michigan. Michael George is a past president of the association. Chaldeans are Christians descended from predominantly Muslim regions of the Middle East, primarily Iraq.

At first privately, and later through Metro-Detroit Investment Co., which began in 1977, Michael and his older brother, Sharkey, have helped more than 700 businesses get started by providing loans or loan guarantees. In 1988, the Georges and Metro-Detroit Investment had a loan portfolio of $40 million, including loan guarantees. It was good business. Most of those loans were to Chaldeans looking to open their own convenience and grocery stores. As a provision of those loans, the stores were encouraged to buy their milk products from Melody Farms. Additionally, the George family has been involved with real estate, health care consulting and technology companies in the Detroit area.

Eberle said the purchase by Dean Foods makes sense and follows a trend of similar purchases and exclusivity agreements the company has made during the past two years.

“They are definitely going after the milk market,” he said. “I think it makes a lot of sense given that the grocery business is so competitive right now.”

He said Bentonville, Ark.-based Wal-Mart Stores Inc. in particular, has used volume purchasing to drive down prices that milk producers can fetch.

“If I was a supplier, and this seems to be what Dean is doing, I’d get as large a share of a platform as you can. You put Wal-Mart in a position where they have to buy from you. It evens out the distribution versus manufacturing playing field.” He added getting bigger makes it easier to get economies of scale that reduce costs.