JBS Reconsiders Sara Lee Bid - Analyst Blog

The shares of Sara Lee Corp. (SLE) rose more than 2.5% after the news that the world's top meat processor JBS S.A. along with a group of private equity firms are about to reconsider the bid for Sara Lee's meat and coffee division. Previously, the company rejected the bid of about $17.50 per share considering it to be too low.

Although Sara Lee did not provide any purchase price to JBS S.A., sources reveal that the company is looking for a sell out at $20.00 per share. Sara Lee announced that it will spin-out its meat and coffee business if the buyout fails to attract potential buyers and introduce new bids considering both as an independent unit.

The divestment is part of the divestiture campaign taken up by Sara Lee to shed its weaker units and focus more on its stronger units like food and beverage. The company has sold its air care business to Procter & Gamble (PG">PG) on July 05, 2010 and its stake of 51% in Godrej Sara Lee, an Indian insecticides business to Godrej, the Indian partner.

In December 2010, the company also completed the sale of its body care business to Unilever for $1.2 billion. The company also sold its global shoe care business including the Kiwi brand to SC Johnson in the first week of January.

Sara Lee's meat business includes brands like Jimmy Dean, Hillshire Farm and Ballpark. Further, the company's beverage brands include Senseo and Pickwick.

Sara Lee had recently been approached by several buyers to acquire the meat and coffee unit. Earlier in the month, a consortium of interested buyers comprising Apollo Global Management, C Dean Metropoulos, Bain Capital and TPG Capital was formed to consider a bid.

JBS S.A.'s executives are reportedly joining hands with several private equity funds to raise the price for the bid. The takeover will help JBS to boost its profits and also establish a stronger presence in the processed food markets. The cattle and pig slaughtering operations of JBS is anticipated to gain globally if the buyout works.

Currently, we have a Neutral rating on the stock. Further, Sara Lee holds a Zacks #3 Rank, which translates into a short-term Hold rating.