NEW YORK (AP) — Sara Lee Corp. is selling its North American Fresh Bakery unit to baking company Grupo Bimbo for $959 million as it looks to concentrate more on its coffee and meat businesses.
The maker of Jimmy Dean sausages and Sara Lee breads said Tuesday that the sale will allow it to aggressively expand other businesses through acquisitions and other means. The company also reported its first-quarter earnings declined, burdened by higher commodity costs and higher marketing spending.
Grupo Bimbo said it will make a more than $1 billion investment in the U.S. over the next five years to add bakeries, enhance existing plants and improve its infrastructure and technology.
The transaction, which includes 41 U.S. plants, lets Sara Lee keep the right to sell Sara Lee brand frozen desserts and meat products such as sliced deli meats.
Grupo Bimbo will have rights to the Sara Lee brand in fresh baked goods globally, excluding Western Europe, Australia and New Zealand. About 13,000 employees will be transferred.
Grupo Bimbo, based in Mexico City, is the largest food company in Mexico and a major baker in the U.S. and Central America. Its 2009 revenue was $8.6 billion. Its brands include its namesake bread, Lara cookies and crackers, Arnold, Stroehmann, Entenmann's and Thomas' baked goods.
The company said the acquisition will help it reach U.S. regions it currently doesn't cover.
"When added to Bimbo Bakeries USA's facilities, Sara Lee's bakeries provide us with a strong national network, as Sara Lee has a significant presence in the Midwest and Southeast while Bimbo's base is in the Northeast and Texas," Bimbo Bakeries USA President Gary Prince said in a statement.
Bimbo Bakeries USA, based in Horsham, Pa., is a subsidiary of Grupo Bimbo.
Grupo Bimbo plans to concentrate some of its efforts on Sara Lee's Soft & Smooth breads, saying it will expand their geographic reach.
The deal gives Grupo Bimbo 41 additional plants in the U.S. and about 4,700 delivery routes. When the transaction closes, the company will have 75 bakeries in 31 states, more than 13,000 sales routes and more than 28,000 employees.
Grupo Bimbo has 98 plants worldwide. Its U.S. business accounted for about $2.1 billion in adjusted net sales and $38 million in adjusted income in the year ended Oct 2.
Besides the Sara Lee brand, the acquisition also gives the Mexican baker regional brands including Grandma Sycamore's, Heinter's and Rainbo.
The deal is expected to close in 2011's first half.
Sara Lee also said Tuesday that its net income fell 32 percent to $192 million, or 29 cents per share, compares with $284 million, or 41 cents per share. Adjusted earnings from continuing operations were 13 cents per share. Revenue slipped less than 1 percent to $2.58 billion.
Analysts polled by Thomson Reuters predicted earnings of 17 cents per share on revenue of $2.48 billion. These estimates usually take out one-time items.
Sara Lee, which is based in Downers Grove, Ill., also boosted its 2011 earnings outlook, citing the strong euro and lower interest expense. The company now expects adjusted earnings from continuing operations between 92 cents and 99 cents per share. Its prior guidance called for earnings in a range of 88 cents to 95 cents per share.
Analysts predict earnings of 94 cents per share for the year.