SLE Hillshire Brands Company

Sara Lee Corporation (SLE) recently announced that its board of directors has approved the spin-off of its international coffee and tea business into a separate publicly traded company. Moreover, as part of the split, the company also announced a special dividend of $3.00 per share to its shareholders. The board also approved a 1-for-5 reverse stock split immediately after the spin-off. The spin-off is expected to be completed by the end of June.

The coffee and tea company to be called CoffeeCo will distribute its common stock to Sara Lee shareholders on June 28, 2012, to the shareholders of record June 14. Thereafter, the special dividend will be paid to CoffeeCo shareholders on record immediately after the distribution of the CofeeCo common stock. CoffeeCo will then merge with a subsidiary of D.E. Master Blenders 1753. Subsequently, the shares of D.E. Master Blenders 1753 will be distributed among CoffeeCo shareholders.

Post spin-off, the international coffee and tea business will be domiciled in the Netherlands and will move its headquarters to Amsterdam in the second half of 2012. Its operations will be spread across Europe, Brazil, Australia and Thailand and will include popular tea and coffee brands such as Douwe Egberts, Senseo, L’OR EspressO, Marcilla, Pilão, Moccona, Pickwick and Hornimans.The company which will retain the legacy Sara Lee name will include the North American retail, foodservice and specialty meats business.

The spin-off is part of Sara Lee’s plan to trim its portfolio in order to provide the best foundation for a strong and focused business. Sara Lee has been shedding its redundant units one by one to focus on its most profitable food and beverage businesses.

Among the latest deals, in early January this year, Sara Lee completed the sale of the majority of its North American Foodservice coffee and tea operations to The J.M. Smucker Company (SJM) in an all-cash transaction. In December 2011, Sara Lee had divested its fresh bakery business in Spain and Portugal to Mexico’s Grupo Bimbo S.A.B. de C.V.

Our Recommendation

We currently have a Neutral recommendation on Sara Lee Corporation. The stock carries a Zacks #3 Rank (short-term ‘Hold’ rating).

 
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