Sara Lee opts to split in two

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Sara Lee said Friday that its board agreed unanimously to divide the Downers Grove-based company into two separate, publicly traded companies by early 2012.

The North American Retail and North American Foodservice businesses, including the Sara Lee, Jimmy Dean and Ball Park brands, would be combined and spun off as one company that will keep the Sara Lee name and keep its headquarters in Downers Grove, company executives said. This company’s revenues would have totaled $4.1 billion in fiscal 2010. The company will be headed by CJ Fraleigh, 47, the current CEO for North America.

Fraleigh said the new Sara Lee “remains committed to the Chicago area” but neither he nor other executives could say what will happen to Sara Lee’s 1,360 employees in the Chicago metro area.

The second company, which has yet to be named, would consist of Sara Lee’s international beverage and bakery businesses, with coffee brands such as Senseo, Douwe Egberts and Pickwick. Referred to internally as “CoffeeCo,” it could be based in Europe, but no final decision has been made, said Marcel Smits, 49, who was named Sara Lee CEO today after having served as interim CEO. No new leader has been named, but Smits lauded the work of Frank van Oers, who now heads the international beverage and bakery business.

Explaining why Sara Lee’s board made its decision, Smits told an investors’ call Friday morning, “We received unsolicited indications of interest to buy the entire company. We have carefully considered them and concluded today’s announcement is in the best interest of our shareholders.”

Analysts questioned whether a spinoff would be the best decision from a tax standpoint, but Smits said the spinoff plans “better position each company to acquire or partner with other businesses.”

Smits cited a letter written to Sara Lee executives by one of the company’s major investors, stating the investor’s preference for a spinoff because it would make it easier to sell the independent businesses to private-equity players. Analysts expect bidders to vie to take over the two new companies.

In conjunction with the spinoffs, Sara Lee’s board intends to declare a $3 per share special dividend, to be paid in fiscal 2012.

Sara Lee also announced that Jan Bennick, 54, former CEO Of Royal Numico, will oversee the spinoff, and will become a director and executive chairman. The current executive chairman, Jim Crown, will continue serving on the board and serve as lead independent director.

Sara Lee has been shrinking for the past 10 years. It spun off its Coach handbag division in 2001 and its apparel and underwear business in September 2006. It sold off its bakery, body-care and insecticides businesses, and now consists primarily of a domestic meats division and an international coffee business. The coffee business accounted for half of Sara Lee’s profits in the three-month period ending Dec. 26.