Packaged food company Sara Lee Corp. (SLE), which failed to agree on recent buyout offers, decided to divide the company into two publicly traded entities. Further, Marcel Smits has been named the new Chief Executive Officer and Mark Garvey the chief financial officer. The company also updated fiscal 2011 forecast above analysts' consensus.
As per the plan, Sara Lee's North American Retail and North American Foodservice businesses, excluding the North American beverage business, will be spun off, tax-free, into a new public company and will retain the "Sara Lee" name. Meanwhile, the other company, which is yet to be named, will consist of Sara Lee's current International Beverage and Bakery businesses, as well as North American beverage business.
Sara Lee noted that upon separation, each company will have leading consumer brands, compelling growth prospects and strong potential to deliver long-term value to shareholders.
In conjunction with the planned separation, the company's board intends to declare a special dividend of $3.00 per share, which will be paid in fiscal 2012 and before completing the spin-off of Sara Lee's North American Retail and North American Foodservice businesses. The majority of the special dividend will be funded with proceeds from the sale of the North American Fresh Bakery business.
James Crown, chairman of the company said, "We have carefully considered various strategic alternatives, including unsolicited indications of interest in the company. We believe that the spin-off, plus the one-time special dividend, offers the greatest potential for delivering long-term shareholder value."
The company added that the separation plan will also be subject to final approval by the board of directors, other customary approvals and receipt of an IRS tax ruling.
Last Sunday, Sara Lee has reportedly received a takeover bid from a group led by private equity firm Apollo Global Management LLC. Meanwhile, Brazilian meat processor JBS SA was said to be considering a revised bid for Sara Lee, backed by Blackstone Group LP (BX).
The new CEO Smits has been serving the company as interim CEO since May 2010. In his new role, he will be responsible for the company's day-to-day operations and execution of annual operating plan and strategy.
Further, company named Mark Garvey as Chief Financial Officer, who has been serving as interim Chief Financial Officer, since May 2010.
The board has also appointed today Jan Bennink as Director and Executive Chairman, effective immediately. Bennink replaces Jim Crown, who has served as Chairman of the board since May 2010. In addition, CJ Fraleigh, who currently serves as Sara Lee's Chief Executive Officer, North America, will be named Chief Executive Officer of the new North American Retail and Foodservice business upon completion of the spin-off.
For fiscal 2011, the company now expects total earnings per share in the range of $1.11 to $1.17 per share, compared with its earlier guidance range of $1.09 to 1.18 per share. Adjusted earnings are expected in the range of $1.03 to 1.09 per share, compared to the its prior outlook range of $1.01 to $1.10 per share. Analysts are looking for earnings of $0.93 per share for the fiscal.
For the fiscal, the company sees net sales to be between $11.9 billion and $12.1 billion, up from the prior view of $11 billion and $12.1 billion. Analysts currently expect sales of $10.88 billion for the year.
For fiscal 2012, Sara Lee expects adding a total of approximately $0.15 to earnings per share from continuing operations.
SLE closed Thursday's regular trading at $17.64 on the NYSE.
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