We all know that oil and water don't mix. Apparently, oil and milk don't go so well together, either. That, at least, seems to be the thinking over at dairy giant Dean Foods (NYSE:DF), which will be selling off its dips and dressings in its latest divestiture.

Dean reported its fiscal second-quarter earnings last week. Let's go over the numbers first and then take a peek at the company's more interesting news. Year to date, Dean has grown its sales by 6.1% over the comparable year-ago period. Net profits increased just 4.4%, as a result of several one-time charges for reorganization and plant closings. But a falling share count helped the company boost its per-share diluted profits by 9.7% to $1.02 for the first half. Further good news appears on the cash flow statement, which shows that last year's net cash outflow has reversed course this year; through the first half of fiscal 2005, Dean has already generated $223 million in free cash.

Now on to the good stuff.

Spinoffs past and sell-offs future
As fellow Fool David Meier discussed back in June, Dean successfully spun off its TreeHouse Foods (NYSE:THS) subsidiary on June 28. Not much has changed in that story since. David thought the spinoff a bit pricey on opening day, and TreeHouse's stock is still trading within a percent or two of the price it fetched back in June.

Meanwhile, back at the ranch, Dean is already preparing its next deal, as it readies Marie's dressings and Dean's dips for sale to Ventura Foods, a joint venture between CHS (NASDAQ:CHSCP) and Japan's Mitsui (NASDAQ:MITSY). The sales price, confirmed by Ventura, will be about $200 million, or eight times EBITDA for the non-dairy Dean Foods units.

Dean warned investors to expect the upcoming sale to slice about $0.02 from its reported net earnings through the end of fiscal 2005. But the move looks like a smart one. At eight times EBITDA, Dean's oily subsidiaries are fetching a considerable premium to what the market is now willing to pay for Dean Foods proper -- which, after the sale, will consist of essentially two divisions: cow's milk and soy milk. Right now, pre-divestiture, Dean's stock is trading for just less than six times EBITDA.

Between the attractive sales price and the freedom it will give Dean Foods to concentrate on its core dairy and faux dairy businesses, this looks like a good deal all around.

Why is it that, whenever the Fool writes about this dairy concern, the talk quickly turns to pickles? Find out in:

Fool contributor Rich Smith does not own shares of any company named above.