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Sara Lee to Split by June

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Sara Lee Corporation recently announced that its widely awaited spin-off of the international Coffee and Tea business will be completed by the end of June 2012. Sara Lee had revealed plans to split the company into two publicly-traded companies in January this year: an international coffee and tea business and a North American retail, foodservice and specialty meats business.

Post spin-off, the international Coffee and Tea business will be domiciled in the Netherlands and will move its headquarters to Amsterdam in the second half of 2012. Sara Lee’s subsidiary, DE International Holdings, will hold all the assets related to the Coffee & Tea business and will become a subsidiary of the new Dutch company. In addition, all of the outstanding ordinary shares of DE International will be owned by the shareholders of Sara Lee. DE International will also pay a special dividend of $3.00 to Sara Lee shareholders, once the spin-off is completed. Following the spin-off, Sara Lee expects to reduce its current deferred tax liabilities by approximately $700 million.

The spin-off is part of Sara Lee’s plan to trim its portfolio in order to provide the best foundation for a strong and focused business. The company has more plans stored up for the future. Sara Lee has been shedding its redundant units one by one to focus on its most profitable food and beverage businesses.

Among the latest deals, in early January this year, Sara Lee completed the sale of the majority of its North American Foodservice coffee and tea operations to The J.M. Smucker Company (SJM - Free Report) in an all-cash transaction. In December 2011, Sara Lee divested its fresh bakery business in Spain and Portugal to Mexico’s Grupo Bimbo S.A.B. de C.V. Per the terms of the transaction Sara Lee’s fresh bakery brands in Spain and Portugal as well as seven manufacturing facilities have been divested.

Our Recommendation

We currently have a Neutral recommendation on Sara Lee Corporation. The stock carries a Zacks #3 Rank (short-term ‘Hold’ rating).

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