Breaking News: Sara Lee to Split into Two

Sara Lee Corp.’s board of directors has agreed in principle to divide the company into two separate, publicly traded companies. The separation is expected to be completed in early calendar year 2012.

According to a press release issued today, each company will have leading consumer brands, compelling growth prospects and strong potential to deliver long-term value to shareholders.

Under the plan approved by its board, 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 that will retain the “Sara Lee” name. Its leading brands will include Sara Lee, Jimmy Dean, Ball Park, Hillshire Farm, Chef Pierre and State Fair. The new company would have reported approximately $4.1 billion in revenue in fiscal 2010.

The yet-to-be-named other company will consist of Sara Lee’s current International Beverage and Bakery businesses, as well as the North American beverage business. Its leading brands will include Douwe Egberts, Senseo, Pickwick, Maison du Caf, L’OR, Caf Pilo, Marcilla and Bimbo. This entity would have reported approximately $4.6 billion in revenue in fiscal 2010 using fiscal 2010 actual exchange rates.

 “Today’s announcement is a logical step following the divestment of our International Household and Body Care business and the announced sale of our North American Fresh Bakery business,” says James Crown, Sara Lee Corp.’s chairman of the board. “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. These two pure-play companies will have their own distinct growth strategies within their respective core markets that will attract a more focused shareholder base.”

The company is developing detailed implementation plans for the spin-off and will continue to evaluate a variety of methods to enhance the efficiency of the operating structure of the two companies. Sara Lee will consult with relevant works councils during the process. The separation plan will also be subject to final approval by the board of directors, other customary approvals and the receipt of an IRS tax ruling. Further details will be disclosed at a later date.

The board of directors also announced that, effective immediately, it has appointed Jan Bennink, 54, as director and executive chairman. Bennink’s primary responsibility is the leadership and implementation of the spin-off, in addition to chairing the board of directors and building and maintaining a senior management team. Bennink replaces Jim Crown, who has served as chairman of the board since May 2010. Crown will continue on the board and will serve as lead independent director.

Also effective immediately, Sara Lee has appointed Marcel Smits, 49, as chief executive officer. Smits has been serving as the company’s interim CEO since May 2010. In his role as chief executive officer, Smits will be responsible for Sara Lee’s day-to-day operations and execution of the company’s annual operating plan and strategy.

In addition to Bennink and Smits, the board of directors has named Mark Garvey, 46, as chief financial officer. Garvey has been serving as interim chief financial officer since May 2010. The Board has also determined that CJ Fraleigh, 47, 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.