Bake Sale: Sara Lee Close to Selling Unit to Grupo Bimbo


Sara Lee reportedly is close to cutting a deal to sell its North American bakery business to Grupo Bimbo for a sticker price of $900 million to $1 billion, according to a Bloomberg report.

That transaction would allow Sara Lee (SLE) to redirect attention to its other brands, such as the high-margin L' OR Espresso it recently launched in France. And for Mexico-based Grupo Bimbo, acquiring Sara Lee's North America bakery business would not only expand its footprint in the U.S., but also reduce the competitive landscape that ate away at its third-quarter U.S. performance -- where sales fell 1.5%.

"Higher volumes could not offset pricing pressures resulting from a challenging economic and competitive environment," Grupo Bimbo said in its third quarter earnings report. U.S. sales accounted for 41% of Grupo Bimbo's business in the third quarter.

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A deal between Sara Lee and Grupo Bimbo could be struck as early as this week, but Bloomberg noted that in recent weeks the process has slowed over purchase price and labor costs. Grupo Bimbo reported its third-quarter results on Oct. 21 and Sara Lee will be releasing its fiscal first-quarter results on Nov. 10.

When Sara Lee held its annual analyst meeting in mid-September, it said its North America fresh bakery business had recently undergone a simplification, including standardized pricing. The company's North America CEO noted that the fiscal first quarter should bring a strong investment quarter for the fresh bakery unit and he expected fiscal 2011 overall should show improvement over fiscal 2010.

During its fiscal fourth quarter, Sara Lee's North America bakery business took a hit. Its adjusted net sales fell 4.5% to $535 million and its adjusted operating income dropped 39.4% to $17 million.

Earlier this year, the food giant had sought $1.5 billion for its North American bakery unit, but in October lowered its expectations to around $1 billion, according to Bloomberg.

Around that time, Sara Lee's stock soared 18% during premarket trading, after reports surfaced that the company turned down an offer from privately equity firm KKR for $12 billion for the entire company.

Shares of Sara Lee were down slightly in morning trading by 0.61% to $14.71 a share.