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Yesterday evening, Standard & Poor’s announced that Kansas City Southern will be replacing Dean Foods in the S&P 500 while DF will take KSU’s places in the S&P Midcap 400.  This little bit of index musical chairs will take place after the close on May 23rd, coincidental with DF’s distribution of WWAV shares to DF holders.



We wrote about this earlier in the week, and while we expect that index funds have likely gotten ahead of this change, we still may see some selling pressure.  Any weakness in DF (or DF when issued, for those folks that can buy it) represents an opportunity, in our view.

 

We are also going to take this opportunity to provide some more granularity with respect to the current values of the various moving parts of this situation.  We continue to see material upside to the EV/EBITDA multiple covering the fluid milk business at DF.

 

DF - Sayonara to the S&P 500 - DF math

 

Call with questions,

 

Rob