Grupo Bimbo SAB, the world’s largest bread maker, is in the lead to buy Sara Lee Corp.’s North American bakery business to bolster its U.S. operations, said two people with knowledge of the bidding.
A sale of the business, which includes the largest fresh- bread brand in the U.S., may fetch more than $1 billion, said the people, who declined to be identified as the process isn’t public. A deal would accelerate a broader overhaul of Sara Lee, which is focusing on brands such as its Jimmy Dean meats.
Any deal is probably a few weeks away, and an agreement could still fall apart in late stages, said the people. Some private-equity funds are also still looking at the bread business, though Bimbo has emerged as the likeliest buyer, they said. Earlier interest from New York-based Ripplewood Holdings, which owns Wonder Bread maker Interstate Bakeries Corp., has waned, the people said.
“Bimbo makes the most sense,” said John Baumgartner, analyst at Telsey Advisory Group in New York. “They’ve been very aggressive in building up market share, and they could swing a deal for it. I don’t think a private-equity firm would want to get involved given the amount of money needed to fix this business.”
Sara Lee rose 31 cents, or 2.1 percent, to $14.81 at 4:01 p.m. in New York Stock Exchange composite trading, after earlier dropping as much as 1.8 percent. Grupo Bimbo fell 15 centavos to 92.74 pesos in Mexican trading.
Mike Cummins, a spokesman for Downers Grove, Illinois-based Sara Lee, declined to comment. Monica Breton, a spokeswoman for Grupo Bimbo, had no immediate comment. Jeffrey Taufield, a spokesman for Ripplewood, declined to comment.
Sara Lee Interest
Apollo Global Management LLC and KKR & Co. both expressed interest in a possible buyout of Sara Lee earlier this year, people with knowledge of the situation said this month. The company decided instead to focus on the sale of its bread business, they said.
Sara Lee had initially aimed to fetch about $1.5 billion for the bakery unit and will likely fall short of that amount, the people said.
Buying the bread unit may help make the U.S. Bimbo’s largest market, building onto its $2.5 billion purchase of George Weston Ltd.’s U.S. baking operations last year. Mexico City-based Bimbo, led by Chief Executive Officer Daniel Servitje, now gets more than 40 percent of sales from the U.S.
Bimbo, which makes Entenmann’s cakes, Thomas’ English Muffins and Mrs. Baird’s breads, currently gets the bulk of its sales from Mexico. The baker has cut prices in the U.S. over the past year as demand slumped, according to Ana Paula Pedroni, an analyst with IXE Grupo Financiero SAB in Mexico City.
Sara Lee’s North American bread unit is facing off with cheaper store brands and regional bakeries such as Flowers Foods Inc.. Sales for the division dropped 3.3 percent to $2.13 billion in the year ended July 3, trailing the performance of other Sara Lee businesses, such as international beverage operations.
A sale of the bread business would extend the multiyear reorganization of Sara Lee, which spun off the Hanesbrands Inc. underwear unit in 2006 and last year agreed to divest its air freshener and body-care divisions. The company has better growth prospects for its meat and beverages units, Baumgartner said.
Before looking to sell the bread operations, Sara Lee had tried to attract more customers with products such as white bread made with whole grains, and marketing campaigns tied to films such as “Toy Story 3” and “High School Musical.” The company has also made acquisitions, such as the $72 million purchase of Butter Krust Baking Co. in 2006.