Sara Lee likely to split into 2 businesses: report

Sara Lee Corp is moving ahead with plans to split up its meats and coffee businesses into two separate companies after it rejected Brazilian beef processor JBS SA's takeover offer last month, according to a media report.

"Sara Lee Corp is moving ahead with plans to split up its meats and coffee businesses into two separate companies," The Wall Street Journal reported citing people familiar with the matter.

The report said that JBS has not ruled out its interest in buying Sara Lee, which has a market capitalisation of USD 11 billion, and could yet come back with a higher offer. But they cautioned that JBS, which has a market cap of about USD 10 billion, could have trouble securing financing for a deal.

No other potential buyers have emerged for Sara Lee, which has a significant presence in India.

Separating the two divisions could make it easier for other buyers, including JBS, to make a play for the coffee and meats businesses independently, the report pointed out.

Sara Lee's coffee business, which has growing brands in Europe and Brazil, is among its most attractive assets, with $3 billion in revenue and 18 per cent in operating margins. The meats business had $346 million in income from continuing operations on $2.82 billion in sales.

According to the publication, Sara Lee declined to comment, while JBS did not respond to a request for comment.

Sara Lee, which has wrestled for years with its strategic direction and anaemic stock performance, has focused in recent years on trimming its businesses to focus on beverages and meats. Most recently, it sold off its shoe-care and cleaning products businesses.

Sara Lee's former chief executive, Brenda Barnes, spearheaded many of the recent changes at the company, but its future came into question after Barnes suffered a stroke and stepped down last summer.

Operating under an interim CEO, the company would rather not hire a permanent replacement if it intends to break up anyway, the report noted.