Sara Lee Corporation (SLE) moved ahead with its policy of streamlining its portfolios as it announced the completion of its sale of North American Bakery Business to Grupo Bimbo SAB, considered as the world’s largest bread maker.
Sara Lee is transferring its business to Bimbo for $709 million. The transaction, which includes the right to the Sara Lee brand for bakery goods in the U.S. and regional brands such as Heiner’s and Rainbo for Grupo Bimbo, was announced last year.
The deal was previously decided at $909 million, which was later brought down to the present price, in order to adhere to the U.S. Department of Justice rulings. The ruling also required Mexico City-based Grupo Bimbo and its U.S. baking unit, BBU Inc., to divest the rights to sell certain Sara Lee brands in eight markets, to prevent anti-competitive conditions in the market.
The buyout of the bread unit from Sara Lee will help Bimbo capture the largest market share in U.S., building onto its $2.5 billion purchase of the U.S. baking operation, George Weston Ltd. last year.
Sara Lee’s Past Actions
Sara Lee plans to wind down the rest of its North American beverage business. It will discontinue its Senseo coffee brand in North Americas by March 31 of next year. Additionally, it will sell or close the remaining assets of the business.
Recently, Sara Lee has been chucking its redundant units one by one to focus on its most profitable food and beverage businesses.
Early this month, the company announced an agreement to sell its fresh bakery businesses in Spain and Portugal to Mexico's Grupo Bimbo S.A.B. de C.V. The agreement includes all Sara Lee fresh bakery brands in Spain and Portugal as well as seven manufacturing facilities.
Again, last August Sara lee signed an agreement to sell its North American Refrigerated Dough business to Ralcorp Holdings, Inc (RAH), for approximately $545 million. The two retail giants are expected to complete the deal by the end of calendar year 2012.
It has also announced its decision to sell the French refrigerated dough unit and recently Franco-Canadian private equity firm, Sagard, has emerged as the final bidder in the deal.
Plans for Future
The company’s policy of streamlining the portfolios to provide the best foundation for a strong and focused business continues, with more plans stored up for the future.
Sara Lee, is planning to split itself into two public companies in the first half of next year. The North American unit will be one company and include brands such as Jimmy Dean and Hillshire Farm. The international beverage business will be another company, and will include brands such as Pickwick and Maison du Cafe.
Quarter Performance
Sara Lee registered decent first quarter 2012 earnings of 18 cents per share that shot up by 50% from 12 cents posted in the year-ago period. Earnings also exceeded the Zacks Consensus Estimate by a penny.
For fiscal 2012, Sara Lee affirmed its earnings guidance to be in the range of 89 cents to 95 cents per share, amidst unfavorable foreign currency exchange rates and the reclassification of North American Foodservice Beverage as a discontinued operation.
Currently, Sara Lee holds a Zacks #3 Rank implying a short-term Hold rating. On a long-term basis, we maintain a Neutral rating on the stock.
SARA LEE (SLE): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment