Sara Lee Corp’s talks to sell itself to Brazilian meat processor JBS SA have hit a snag over price, according to two people with direct knowledge of the situation.
Sara Lee, the maker of Jimmy Dean foods and Ball Park hotdogs, recently rejected a takeover offer from JBS, deeming the price too low, said the people, who declined to be identified because the talks are private. The bid was less than Sara Lee’s intraday high of $17.62 on December 17, when the Wall Street Journal reported the companies were in talks, the people said. The stock closed at $17.26 that day, valuing Sara Lee at $11 billion.
The board of Sara Lee, which is considering other options for the Downers Grove, Illinois-based company, hasn’t given JBS a specific price at which it would sell, the people said. JBS, the world’s largest meat-processing company, has been in talks with Sara Lee about a deal for several months and many key details have been worked out, the people said.
Spokesmen for Sara Lee and JBS declined to comment.
Sara Lee rose 24 cents to $17.50 at 10:22 am in New York Stock Exchange composite trading. The shares had advanced 42 per cent this year before today.
Sara Lee, whose sales surpassed $10 billion last year, has decided to sell other divisions, such as the North American bakery unit, to concentrate on its faster-growing coffee and meats businesses. The company has been led by interim Chief Executive Officer Marcel Smits since Brenda Barnes resigned four months ago to focus on her health.
“At this point, we see Sara Lee at a crossroads,” Alexia Howard, an analyst at Sanford C Bernstein, said in a December 14 note to clients. The sale of the bakery unit and other businesses “could pave the way for a broader breakup scenario or takeover over the coming year.”
Possible break-up
No deal is imminent and it is unclear if a sale will be completed, said the people. JBS is being advised by JPMorgan Chase & Co in the transaction. Bank of America Corp is advising Sara Lee.
Sara Lee’s board is also analysing whether it should spin off either its remaining meats or coffee divisions, a decision that would be driven by the tax implications of these transactions, said the people familiar with the matter. The board has moved slowly on naming a new CEO as it assesses its options, the people said. Sara Lee also attracted interest from buyout firms including Apollo Global Management LLC and KKR & Co earlier this year, people with knowledge of the matter said in October. Those approaches were rejected, the people said.
A sale to JBS would likely result in a higher price than a purchase by private-equity firms, so Sara Lee is giving JBS time to see if it can raise the financing and is willing to risk its credit rating, according to the people. JBS’s market value is just below Sara Lee’s at about $10.5 billion.
JBS is trying to avoid taking on so much debt that it will slide further below investment grade, the people said. JBS has made about more than a dozen acquisitions since 2007, expanding into the US, Australia and Europe.
