Sara Lee sells North American bakery unit to Grupo Bimbo

Posted by Nicole Eckersley on 11th November 2010

sara-lee-2.jpgUS food group Sara Lee has agreed to sell its North American fresh bakery operations to Mexico’s Grupo Bimbo in a deal worth US$959 million, following months of speculation over Sara Lee’s domestic bread arm.

Sara Lee said the sale meant it could focus on its protein and coffee operations, with interim CEO Marcel Smits saying the company would “aggressively invest” in both businesses.

“In both categories, we are a leading player, with healthy margins and a strong track record of innovation. We are actively pursuing growth here, organically and through acquisitions,” Smits said.

Sara Lee said the combination of its North American bakery business with Bimbo’s US division would create “a leading fresh bakery company” in the US. The deal is expected to close in the first half of next year.

The chief executive of Grupo Bimbo said that the company’s acquisition of Sara Lee’s fresh bakery business in North America represented a “milestone” for the Mexican food giant.

Daniel Servitje said Bimbo’s acquisition of Sara Lee’s domestic bakery division showed the company’s “commitment and singular focus” on building a US business that provides the “highest-quality products at the best value to consumers”.

The deal, which is expected to close in the first half of next year, is Bimbo’s second bakery acquisition in the US in two years. Last January, Bimbo secured the purchase of George Weston Ltd’s bakery business in the market.

The combination of Bimbo’s US arm with Sara Lee’s North American bread operations will create a business that runs 75 plants and generates pro forma sales of $5.8bn, based on estimates for 2010.

Bringing together the two businesses is expected to lead to US$150-200m in annual cost savings by 2013, Bimbo said.

“We will immediately, upon closing, begin to improve the efficiency of this platform by investing in excess of US$1bn in bakeries, technology and infrastructure over the next five years,” said Gary Prince, president of Bimbo Bakeries USA, the Mexican group’s US arm.

Internationally, the deal will also give Bimbo a perpetual licence to the Sara Lee brand in fresh bakery in the Americas, Asia, Africa and Europe.

Alongside the results, Sara Lee booked a 32% fall in first-quarter profits. Adjusted earnings per share from continuing operations reached $0.13 versus $0.17 a year ago due to higher marketing and commodity costs. Net sales dipped 0.5%.

However, Sara Lee lifted its full-year adjusted EPS target by $0.04 to $0.92-0.99 due to a stronger euro and lower interest costs.

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