Knudsen Will Sell Southern Units to Texas Dairy Firm

The troubled Knudsen Foods dairy company moved a step closer to completing its liquidation Friday with the announced sale of its Texas and Louisiana operations for $25.5 million.

Los Angeles-based Knudsen Foods, the largest dairy operator in the West until it was forced to seek bankruptcy court protection in September, is the parent of Knudsen and Foremost dairies.

Company officials said Friday that they will sell Knudsen’s Schepps Dairy in Dallas and Foremost facilities in Dallas, Fort Worth, San Antonio and Shreveport, La., to Associated Milk Producers of Arlington, Tex. Associated Milk Producers is a major dairy cooperative that has been supplying milk to the Schepps and Foremost operations in Texas.

After the sale, the company will still have only its facilities in Missouri, Arkansas and Hawaii, for which buyers still are being sought.

Knudsen, known to generations of Californians for its cottage cheese, milk and yogurt, has already sold most of its California operations to Southern California’s Hughes Markets and Chicago food conglomerate Kraft Inc. for $68 million.

Other subsidiaries in California and the West have been sold piecemeal over the past several months to satisfy secured and unsecured creditors, who as a group were owed about $270 million when the company sought Chapter 11 protection from creditors on Sept. 17.

Knudsen officials have acknowledged that there will not be enough money to pay all of the unsecured creditors, including dozens of California milk producers, even after all assets have been sold. Knudsen owes its unsecured creditors about $80 million.