
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, September 28, 1995                   TAG: 9509280041
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: MAG POFF STAFF WRITER
DATELINE:                                 LENGTH: Medium

BIG MERGER CLEARING WAY FOR LOCAL DAIRY

Valley Rich Dairy of Roanoke will gain new business from a divestiture of school milk distribution routes under a proposed merger of two dairies in Kentucky and Tennessee.

The U.S. Department of Justice, in approving the merger, said Wednesday that the divestiture will assure that school milk prices remain competitive in Virginia, West Virginia, the Carolinas and Tennessee.

Because of the importance of the school milk distribution system, the department said, divesting of routes to Valley Rich will assure that competition is maintained in the school districts.

The Justice Department's antitrust division approved a $48 million deal in which Land-O-Sun Dairies Inc. of Johnson City, Tenn., acquired Flav-O-Rich Inc. of Kentucky.

As part of the deal, Mid-America Dairymen Inc. of Springfield, Mo., owner of Flav-O-Rich, agreed to divest its school milk routes. The department said Valley Rich is a strong competitor in the bidding for school milk contracts in areas close to those where the merging companies compete.

Anne K. Bingaman, assistant attorney general in charge of the antitrust division, said the transaction otherwise could have increased milk prices in school districts in the Southeast.

"This spin-off will preserve competition, which is especially important in markets like this one, where there has been a history of collusion that has hurt consumers," Bingaman said.

The bidding process in several of the affected markets has in the past been subject to bid rigging collusion by competing dairies, the department said.

The department previously charged the two companies with participating in conspiracies to rig bids on contracts to supply milk to public schools.

Criminal charges against Land-O-Sun were filed in 1989 and 1992. The company pleaded guilty and paid fines totalling $3.9 million. Criminal charges were filed against Flav-O-Rich in 1991 and 1992. The company pleaded guilty and paid fines totalling $12.8 million.

Initially, the antitrust division told the parties that the deal as originally structured could have lessened competition in the sale of milk to many school districts in the five Southeastern states. For some of these school districts, Land-O-Sun and Flav-O-Rich were the only two dairies submitting bids to sell milk, the department said.

by CNB