Sara Lee studies buy-out options

Sara Lee studies buy-out options
By James Politi and Lauren Foster in New York
Copyright The Financial Times Limited 2006
Published: October 4 2006 03:00 | Last updated: October 4 2006 03:00



Sara Lee Corporation, the US food company whose brands include Douwe Egberts coffee and Jimmy Dean sausages, is considering going private following this year's slump in its stock price.

According to people familiar with the matter, a number of private equity firms have been circling Sara Lee and inquired about its willingness to accept a leveraged buy-out.

The board of Sara Lee, and its chief executive Brenda Barnes, have been studying the overtures to determine whether a buy-out could be agreed to at a satisfactory price.

Yesterday, Sara Lee shares closed at $16.06, giving it a market capitalisation of $12.3bn. A year ago, its shares were hovering at about $19. Julie Ketay, spokeswoman for Sara Lee, said: "We can't comment on rumours or speculation in the marketplace."

A private equity takeover of Sara Lee would mark the latest in a series of largeleveraged buy-outs around the world. This week,Harrah's Entertainment, the US casino operator, said it was reviewing a $15.1bn offer from Apollo Management and Texas Pacific Group.

As chief executive, Ms Barnes has been trimming Sara Lee's sprawlingcookies-to-clothing product line to focus on speciality meats, bread, personalproducts and beverages.

Last month the company spun off Hanesbrands, and in June it agreed to sell its European meats business to Smithfield Foods for $575m.

But the restructuring plan has failed to convince Wall Street investors, prompting Sara Lee to begin considering going private in spite of its previous opposition to such a move.

Any buyer of Sara Lee would be taking control of a company with serious challenges facing its core brands, many of which are not leaders in their categories.

In addition, Sara Lee's margins have been under pressure because its competitors have lower costs and a more effective structure.