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Sara Lee spinoff Hillshire Brands to debut amid acquisition speculation

FILE - In this May 22 2009 file phostore employee holds packages Oscar Meyer wieners Kraft product left Ball Park

FILE - In this May 22, 2009 file photo, a store employee holds packages Oscar Meyer wieners, a Kraft product, left, and Ball Park franks, a Sara Lee Corp. product, at a local Dahl's grocery store in Des Moines, Iowa. The nationís two largest hot dog makers are taking their legal beefs to federal court in Chicago, where a judge will determine whether either broke false-advertising laws when boasting about their top-dog status. (AP Photo/Charlie Neibergall, File)

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Updated: July 30, 2012 6:20AM

Sara Lee Corp. officially split into two companies Thursday, and its U.S. meat business begins regular trading on the New York Stock Exchange on Friday.

The company divided into Hillshire Brands Co. (HSH) and a European-based coffee and tea company called D.E Master Blenders 1753.

Hillshire Brands gets the company’s popular meat products, such as Ball Park Hot Dogs and Jimmy Dean’s sausages, while D.E Master Blenders 1753 will focus on Douwe Egbert coffee, where it gets its name, along with brands such as Senseo and L’OR EspressO.

Other Hillshire Brands products include Jimmy Dean, Ball Park, Hillshire Farm, State Fair, Aidells and Gallo.

While Sara Lee sold off its fresh bakery division about two years ago, Hillshire Brands will continue to sell a limited range of frozen desserts, including the company’s famous cheesecake.

The company has plans to move Hillshire Brands from headquarters in Downers Grove to a location in Chicago in 2013, a spokesman for the company said.

The company said its plans include pumping more money into advertising and focusing on product development.

“We envision making Hillshire Brands Company the most innovative meat-centric food company in the U.S.,” Sean Connolly, who becomes CEO of Hillshire Brands after the spinoff, said in a news release.

Sara Lee made its name in the 20th century by gobbling up food companies of every shape and kind before it diversified to include apparel, household and body care brands.

In the 1990s Sara Lee had names such as Playtex Apparel, Hanes, Champion and Coach in its collection.

In 2001, the business had net sales of $17 billion and employed 163,000 worldwide. Through the decade, the company sold off businesses to narrow its focus.

By 2010 Sara Lee had sold its apparel, household, body care brands along with its signature fresh bakery division. The next year, Sara Lee announced it would split into two pure-play companies.

Now, Sara Lee Corp. has about 20,000 employees and reports $8 billion in net sales.

After the spin-off, the company expects D.E Master Blenders 1753 to have net sales of about $3.2 billion and 7,500 employees and for Hillshire Brands to have about $4 billion in net sales and 8,500 employees.

By scaling back its product line and slimming down operations, the company can allocate resources to boosting its new name, Morningstar analyst Kenneth Perkins said.

“You have a focused company where everyone’s on the same page,” Perkins said. The company can concentrate on “differentiating their brands and driving sales growth.”

But the strategy hinges on a successful marketing campaign, Perkins said. Otherwise, Hillshire Brands might get lost in aisles filled with more cost-appealing generics as well as bigger-name competition, including Kraft Foods, Tyson and Hormel.

When Hillshire Brands goes live on the NYSE, the big name competition might already be poised to take a bite.

Bernstein Research analyst Alexia Howard said earlier this week that a takeover of Hillshire Brands would be “fairly likely,” noting Tyson Foods Inc and Hormel Foods Corp. would come out on top in the event of a takeover.

Tyson did not return calls for comment and Hormel declined to comment on takeover plans.

On Thursday evening the company completed a 1-for-5 reverse stock split of Sara Lee shares: Every five shares of Sara Lee stock was converted into one share of Hillshire Brands stock.

Sara Lee distributed to shareholders one share of D.E Master Blenders 1753 for each share of Sara Lee stock they held.

Shareholders were also paid a special $3 dividend on D.E Master Blenders 1753 stock.

D.E Master Blenders is expected to begin regular trading July 9. It will be listed on the NYSE Euronext in Amsterdam under the ticker symbol DE.

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