December 16, 2010

Sara Lee Sells Its North American Fresh Bakery Unit To Mexican Baking Giant Grupo Bimbo For $959 Million

I take issue with US companies dwindling and suffering in the U.S., while foreign companies find themselves prospering in our US market! Now why would that be? Hmmm...


ABC News
written by Michelle Chapman and Sarah Skidmore, AP Business writers
November 9, 2010

Sara Lee Corp. is cutting the apron strings on its struggling North American bread-making business, selling it to Mexican baking giant Grupo Bimbo for $959 million.

The deal makes Grupo Bimbo the largest baker in the U.S. It also marks Sara Lee's last major planned sale of a business line and completes a series of moves to focus on its more-profitable businesses such Hillshire Farms meat and Senseo coffee.

"Sara Lee is indeed a simpler, stronger and a better company," Sara Lee interim CEO Marcel Smits said Tuesday.

Sara Lee, based in Downers Grove, Ill., will still sell its signature frozen cheesecake and deli meats. Grupo Bimbo will have rights to the Sara Lee brand in fresh baked goods globally, excluding Western Europe, Australia and New Zealand.

It adds to Grupo Bimbo's presence as one of the world's largest baking companies. The company, based in Mexico City and traded on the Mexican Stock Exchange, sells brands such as Entenmann's, Tia Rosa and Thomas' (english muffins) baked goods.

Sara Lee's bakery unit has been struggling recently as costs, competition and intense promotions cut into its performance. Analysts said its operating profit margins are well below its peers. And during the most recent fiscal year, the unit's profit was flat and revenue fell more than 5 percent on an adjusted basis to $2.1 billion.

However, the business has strong brand recognition and is the largest bread producer in the U.S. Sara Lee recently raised prices on its products and had said it expected the unit's profitability to gradually improve in 2011.

Grupo Bimbo said it will invest more than $1 billion in the U.S. over the next five years to add bakeries, upgrade existing plants and improve its infrastructure and technology. The deal includes 41 U.S. plants. About 13,000 employees will be transferred.

The acquisition will move Bimbo from its fourth-place ranking in terms of U.S. marketshare to the top spot, according to Ibis World. The deal is expected to close in the first half of 2011.

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