Sara Lee Splits Its Food & Garment Operations
By Jon C. Ogg
May 24, 2006
Sara Lee Corp (SLE-NYSE) this morning has made its move to unlock shareholder value with a spin-off of Hanesbrands. This was part of an ongoing plan to focus on core operations, so this is not entirely new data that was a huge surprise. Last year it was a coin toss over whether they would spin it out in a new company to shareholders or if they would punt it via a sale to a private equity group or to another conglomerate. Now we know the answer.
In the spin-off, Sara Lee will distribute all of the outstanding shares of Hanesbrands common stock to SLE holders. Following the spin-off, Hanesbrands will be a separate publicly traded company from Sara Lee, and Sara Lee will not retain any ownership interest. What this has to make you ask is this: “What was the price that outside firms would have paid, or did anyone even want it?”
Sara Lee expects to complete the spin-off of Hanesbrands between June and September, 2006. The distribution ratio to be determined shortly before the spin-off occurs. In fiscal 2005, this business generated $4.7 billion in net sales.
The business to be spun off as Hanesbrands Inc. is a consumer goods company with a portfolio of leading apparel brands, including Hanes, Champion, Playtex, Bali, Just My Size, Barely There and Wonderbra. The group designs, manufactures, sources and sells a broad range of apparel essentials products such as T-shirts, bras, panties, men's underwear, kids' underwear, socks, hosiery, casualwear and activewear that claims to hold either the No. 1 or No. 2 U.S. market position by sales in most categories in which it competes. Sara Lee says it will drive growth via brands as Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Kiwi, Sanex, Senseo and its namesake, Sara Lee.
You will have to decide on your own if you think this is good, but on the surface this break-up of the two businesses makes perfect sense. Executives that have to simultaneously focus on sausage and underwear as well as cookies and bras just might not be able to focus after a while. Shares of Sara Lee are up 0.58%, or +$0.09, at $17.16 this morning.
The stock hasn't held up that well here with the recent market weakness, and these current stock prices look like the stock is at a critical juncture. Here is a 1-year chart (from Bigcharts.com) on SLE for you to peruse to determine if this is adequately priced into the stock:
May 24, 2006
Sara Lee Corp (SLE-NYSE) this morning has made its move to unlock shareholder value with a spin-off of Hanesbrands. This was part of an ongoing plan to focus on core operations, so this is not entirely new data that was a huge surprise. Last year it was a coin toss over whether they would spin it out in a new company to shareholders or if they would punt it via a sale to a private equity group or to another conglomerate. Now we know the answer.
In the spin-off, Sara Lee will distribute all of the outstanding shares of Hanesbrands common stock to SLE holders. Following the spin-off, Hanesbrands will be a separate publicly traded company from Sara Lee, and Sara Lee will not retain any ownership interest. What this has to make you ask is this: “What was the price that outside firms would have paid, or did anyone even want it?”
Sara Lee expects to complete the spin-off of Hanesbrands between June and September, 2006. The distribution ratio to be determined shortly before the spin-off occurs. In fiscal 2005, this business generated $4.7 billion in net sales.
The business to be spun off as Hanesbrands Inc. is a consumer goods company with a portfolio of leading apparel brands, including Hanes, Champion, Playtex, Bali, Just My Size, Barely There and Wonderbra. The group designs, manufactures, sources and sells a broad range of apparel essentials products such as T-shirts, bras, panties, men's underwear, kids' underwear, socks, hosiery, casualwear and activewear that claims to hold either the No. 1 or No. 2 U.S. market position by sales in most categories in which it competes. Sara Lee says it will drive growth via brands as Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Kiwi, Sanex, Senseo and its namesake, Sara Lee.
You will have to decide on your own if you think this is good, but on the surface this break-up of the two businesses makes perfect sense. Executives that have to simultaneously focus on sausage and underwear as well as cookies and bras just might not be able to focus after a while. Shares of Sara Lee are up 0.58%, or +$0.09, at $17.16 this morning.
The stock hasn't held up that well here with the recent market weakness, and these current stock prices look like the stock is at a critical juncture. Here is a 1-year chart (from Bigcharts.com) on SLE for you to peruse to determine if this is adequately priced into the stock:
posted by Jon C. Ogg at 10:56 AM
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