Borden Will Buy Beatrice Cos. Dairy Business

Food industry giant Borden Inc. agreed Thursday to buy Beatrice Cos.’ dairy products business for $315 million in cash, reflecting growing consolidation in the nation’s dairy industry.

The purchase would extend Borden’s reach into the Mountain and Plains states, where Beatrice’s milk, yogurt and butter products are strong. Borden’s dairy products are considered especially strong in the South and Southeast. Neither company sells milk, yogurt or butter in California, said Maurice O’Reilly, a Borden spokesman.

Over the last several years, the number of companies in the dairy industry has declined as large companies such as Kraft Inc. and Dean Foods have acquired regional dairy companies to increase market share. Kraft recently acquired ice cream and cultured products plants in California from Knudsen, which was the leading dairy company in the state until it filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code last month.

Beatrice Cos. was acquired last November in a leveraged buyout by the Kohlberg Kravis Roberts investment firm, which has been selling parts of the company ever since to finance the $6-billion buyout.

Borden said its sales from dairy products, excluding cheese, are now about $1.3 billion annually, or one-quarter of the company’s sales. The Beatrice dairy products acquisition would increase 1987 Borden sales by about $1 billion and boost earnings by 10 cents to 12 cents a share, Borden said. Analysts had expected Borden to earn between $3.25 and $3.35 a share next year.

The company’s other products include Cracker Jack candied popcorn, Wyler’s drink mixes, Elmer’s glue, Krylon spray paints and Rain Dance auto-care goods.

Borden said it would finance the purchase by selling commercial paper, or corporate IOUs, that would later be converted into medium-term notes. Borden’s long-term debt was $527 million at the end of 1985.

Borden said it believed that the purchase, which must be reviewed by the U.S. Justice Department, would be completed by mid-November.