Sara Lee Splits: Hillshire Looks Like An Attractive Takeover Target

SLE: Sara Lee logo
Sara Lee

Food and beverage company Sara Lee (NYSE:SLE) has officially split into two companies, and its American meats business renamed Hillshire Brands (NYSE:HSH) goes live in its place on the NYSE today, while the Europe-based beverage business, renamed D.E Master Blenders 1753, will be merged with CoffeeCo. After the spin-off, Hillshire Brands and D.E. Master Blenders are expected to have about $4 billion and $3.2 billion in annual sales, respectively.

The company competes with major food and consumer companies like Kraft Foods (NYSE:KFT) and Nestle (NYSE:NESN). Sara Lee has gone for a 1-for-5 reverse stock split, with every five shares of Sara Lee stock converted into one share of Hillshire Brands stock and one stock of D.E Master Blenders 1753 has been given against each Sara Lee stock, along with a special $3 dividend.

See our full analysis for Sara Lee

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Despite an envious portfolio of market leading meat and beverages brands such as Jimmy Dean, Hillshire Farm and Ball Park, Sara Lee had been under-performing and trailing peers in terms of profitability amid demand slump from the food service sector and high commodity costs. The company has divested most of its non-core businesses that weighed on its profitability, particularly through inefficient supply-chain management.

The split is expected to improve profitability and consolidate market share of its core meats and international beverage businesses, which have emerged as attractive take-over targets for other food and beverage players.

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