Can two bankrupt dairies together succeed when they failed individually?

Key debt holders in Dean Foods Co. and Borden Dairy Co. – which filed for bankruptcy protection two months apart – have suggested a contingency plan if federal antirust authorities do not approve the $433 million sale of most of Dean’s assets to Dairy Farmers of America.

DFA would get 44 fluid milk and frozen-dairy processing facilities. A handful of other Dean assets have been sold to individual companies, such as last week’s sale of Dean’s Hilo, Hawaii, facility to MGD Acquisition LLC.

The U.S. Justice Dept.’s Antitrust division has been investigating what a Dean-DFA merger would do to competition and the consumer price of milk. Not only would the deal bring together the country’s biggest producer of raw milk (DFA) with the biggest processor of fluid milk (Dean) but DFA was Dean’s biggest supplier – and Dean was DFA’s biggest customer.

The Wall Street Journal reported last week that Justice Dept. antitrust officials were nearing a settlement with DFA that would let the acquisition move forward. Nevertheless, Dean and Borden bondholders suggested their alternative deal later last week, in case the Dean-DFA merger is scuttled.

Dean Foods filed for bankruptcy protection last November. Borden has been in bankruptcy since this January. Both are casualties of falling milk consumption, falling prices, competition from milk alternatives and retailers building their own processing facilities.