By Julie Alnwick and Carlos Manuel Rodriguez
(Updates with share price in fifth paragraph.)
Nov. 9 (Bloomberg) -- Grupo Bimbo SAB, the world’s largest bread maker, agreed to buy Sara Lee’s North American bakery business for $959 million as it boosts sales outside Mexico.
The transaction will likely close during the first half of 2011 and gives Mexico City-based Bimbo the right to the Sara Lee brand on bakery goods in the U.S. and regional brands such as Heiner’s and Rainbo, the company said today in a statement.
Bimbo, which makes Entenmann’s cakes, Thomas’ English Muffins and Mrs. Baird’s breads, currently gets most of its sales in Mexico. Buying the Sara Lee unit may help make the U.S. Bimbo’s largest market, building on its $2.5 billion purchase of George Weston Ltd.’s U.S. baking operations last year.
Sara Lee’s North American bread unit faces increasing competition from cheaper store brands and regional bakeries such as Flowers Foods Inc. The division’s sales dropped 3.1 percent to $2.1 billion in the year ended Oct. 2, Downers Grove, Illinois-based Sara Lee said today. The company said that the sale will help drive growth in its coffee and proteins business.
Bimbo will have the right to sell the Sara Lee brand in the fresh baked goods category globally, except in Western Europe, Australia and New Zealand. The Sara Lee business includes about 13,000 employees, 41 plants and 4,800 distribution routes.
Sara Lee rose 9 cents to $14.80 yesterday in New York Stock Exchange composite trading. The shares had increased 22 percent this year before today, compared with a 9.7 percent increase in the Standard & Poor’s 500 Index.
Bimbo said it will use its own cash and tap credit lines to finance the transaction.
Sara Lee also today posted a 32 percent drop in first- quarter profit. Net income fell to $192 million, or 29 cents a share. Excluding some items, profit was 21 cents, and earnings from continuing operations on that basis were 13 cents. Analysts projected earnings of 18 cents, the average of estimates compiled by Bloomberg.
--Editors: Dale Crofts, Jessica Brice.
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