Sara Lee Corp., the maker of Ball Park hot dogs and Douwe Egberts coffee, decided to split itself in two after failing to agree to takeover offers from suitors.
Sara Lee said today that it will seek to spin off the meat business as a new public company by early calendar 2012. The board also named Marcel Smits chief executive officer and plans to declare a special dividend of $3 a share.
Sara Lee decided on the split after spurning recent bids from JBS SA and a buyout group led by Apollo Global Management LLC, people familiar with the matter said this week. The separation will make the two new businesses more attractive takeover targets, according to Consumer Edge Research LLC’s Robert Dickerson.
The moves represent the culmination of a six-year transformation of Sara Lee, from a maker of everything from apparel to shoe polish to a company focused solely on food and beverages. The spinoff will leave Smits, 49, with a business focused on beverages, operations that generated about $4.6 billion in the latest fiscal year and include brands like Senseo.
“Spinning off a company does not inherently create value,” said Tim Ramey, an analyst at D.A. Davidson in Lake Oswego, Oregon. “It’s a long road and it means that they’re not likely to be able to sell those units any time soon.” He has a neutral rating on the stock.
Ball Park, Jimmy Dean
The beverage business has yet to be named, while the new meat and foodservice operations will keep the Sara Lee title after the spinoff and be led by C.J. Fraleigh, CEO of the North American retail and foodservice division. The business, which includes brands like Ball Park and Jimmy Dean breakfast sausages, generated about $4.1 billion in the latest fiscal year.
Smits has led Sara Lee on an interim basis since May, when predecessor Brenda Barnes suffered a stroke. Ramey had previously identified both Smits and Fraleigh as contenders for the top job at the food maker.
Sara Lee also said today that it appointed Jan Bennink as chairman effective immediately, and that the executive’s main responsibility is taking care of the spinoff. Bennink will replace Crown, who will stay on the board and serve as lead independent director.
Sara Lee’s sales have dropped for two straight years amid increased competition for recession-weary shoppers. The company had sold off businesses like the body-care division to devote more resources to coffee and meat.
This week, Brazilian meat processor JBS gave up trying to raise funding for a Sara Lee bid, according to a person with knowledge of the matter. Sao Paulo-based JBS, the world’s largest beef producer, had sought to line up financing for an offer of $20 to $21 a share after Sara Lee rejected a lower offer in December, people familiar with the matter said this week.
A group of buyout firms led by Apollo also failed to raise their offer after a bid of about $19 made last week was snubbed, people said.
(Sara Lee began a conference call at 10 a.m. New York time to discuss the moves. To listen, go to http://www.saralee.com.)
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