Sara Lee Goes Split
January 28/Downers Grove, Ill./London Stock Exchange Aggregated Regulatory News Service (ARNS) -- Sara Lee Corp. announced that its board of directors has agreed in principle to divide the company into two separate, publicly traded companies. The separation is expected to be completed in early calendar year 2012. Each company will have leading consumer brands, compelling growth prospects and strong potential to deliver long-term value to shareholders, a release noted.
Under the plan approved by its board, Sara Lee's North American Retail and North American Foodservice businesses (excluding the North American beverage business) will be spun off, tax-free, into a new public company that will retain the "Sara Lee" name. Its leading brands will include Sara Lee, Jimmy Dean, BallPark, Hillshire Farm, Chef Pierre and State Fair. The new company would have reported approximately $4.1 billion in revenue in fiscal 2010.
The yet-to-be-named other company will consist of Sara Lee's current International Beverage and Bakery businesses, as well as the North American beverage business. Its leading brands will include Douwe Egberts, Senseo, Pickwick, Maison du Café, L'OR, Café Pilão, Marcilla and Bimbo. This entity would have reported approximately $4.6 billion in revenue in fiscal 2010 using fiscal 2010 actual exchange rates.
Each company is projected to have an investment grade credit profile, a competitive dividend yield, a corporate tax rate of approximately 35% and future financial flexibility with a targeted gross leverage of 2.0x EBITDA.
In conjunction with the planned separation, the board of directors intends to declare a $3.00 per share special dividend on the company's common stock, the majority of which will be funded with proceeds from the sale of the company's North American Fresh Bakery business. The special dividend is expected to be declared and paid in fiscal 2012 and before completion of the spin-off of Sara Lee's North American Retail and North American Foodservice businesses.
"Today's announcement is a logical step following the divestment of our International Household and Body Care business and the announced sale of our North American Fresh Bakery business," said James Crown, Sara Lee Corp.'s chairman of the board. "We have carefully considered various strategic alternatives, including unsolicited indications of interest in the company. We believe that the spin-off, plus the one-time special dividend, offers the greatest potential for delivering long-term shareholder value. These two pure-play companies will have their own distinct growth strategies within their respective core markets that will attract a more focused shareholder base."
Crown added, "On behalf of the board of directors, I would like to thank the management team and our employees worldwide for their tremendous support of our business and helping shape the long-term strategic plans for Sara Lee."
The company is developing detailed implementation plans for the spin-off and will continue to evaluate a variety of methods to enhance the efficiency of the operating structure of the two companies. Sara Lee will consult with relevant works councils during the process. The separation plan will also be subject to final approval by the board of directors, other customary approvals and the receipt of an IRS tax ruling. Further details will be disclosed at a later date.
The board of directors also announced that, effective immediately, it has appointed Jan Bennink as director and executive chairman. Bennink's primary responsibility is the leadership and implementation of the spin-off, in addition to chairing the board of directors and building and maintaining a senior management team. Bennink replaces Crown, who has served as chairman of the board since May 2010. Crown will continue on the board and will serve as lead independent director.
Bennink has extensive executive leadership experience in the food and beverage and consumer packaged goods industries. Most recently, he served as chief executive officer of Royal Numico and has also held key management positions with Groupe Danone, Benckiser Gmbh and Procter & Gamble. He previously served on the advisory board of ABN AMRO, as well as on the boards of various global companies, including Kraft Foods. He is currently a director of Coca-Cola Enterprises.
"Sara Lee has a powerful mix of iconic brands, people and potential," said Bennink. "I am excited to serve as executive chairman of the board of directors and oversee the company's transition into two publicly traded companies, each with exciting prospects for growth and value creation."
Also effective immediately, Sara Lee has appointed Marcel Smits as chief executive officer. Smits has been serving as the company's interim CEO since May 2010. In his role as chief executive officer, Smits will be responsible for Sara Lee's day-to-day operations and execution of the company's annual operating plan and strategy.
In addition to Bennink and Smits, the board of directors has named Mark Garvey as chief financial officer. Garvey has been serving as interim chief financial officer since May 2010. The board has also determined that CJ Fraleigh, who currently serves as Sara Lee's chief executive officer, North America, will be named chief executive officer of the new North American Retail and Foodservice business upon completion of the spin-off.
"We are pleased to have Jan Bennink join a senior management team that has performed so well, particularly since we formed the office of the chairman in 2010," added Crown.
"He brings strong food and beverage experience, a global perspective and a solid track record of creating shareholder value. The board of directors is confident that with this leadership team in place, this company will build on its past successes as it completes its strategic plan."
From the February 7, 2011, Prepared Foods E-dition