The History of the Takeover

by Alexander Pawellek

Leading up to the current events surrounding the takeover of Sara Lee, the company has sold its Bread and Bakery business to Mexican Grupo Bimbo and its Personal Care arm to Unilever in November 2010 and in December 2010, respectively. Sara Lee has therefore strongly pursued its strategy of concentrating on core brands and spinning off unwanted assets. Earlier, Sara Lee had received a takeover bid for the entire company from the private equity giant Kohlberg Kravis Roberts & Co. The board refused this offer, however.

In August/September of 2010, Sara Lee was first approached by JBS about a possible takeover bid for the company. Talks were carried on and kept secret between the parties which is why the actual beginning of the talks cannot be clearly defined.

In October/November 2010 a second bidder for Sara Lee arose, namely the private equity firm Apollo Global Management along with its associates, Bain and TPG Capital. As before, Sara Lee's board rebuffed the offer from the private equity firm.

As a result, Sara Lee stayed in close contact about a potential takeover only with JBS. On 18. December 2010, however, the talks between the two companies hit a bump due to a disagreement on the price. JBS had bid around $17,50 per share but Sara Lee's board believed this to be too low. The bid would have valued Sara Lee at around $11 bio. Additionally, Sara Lee was not convinced that JBS could secure the necessary financing for the takeover which led the board to refuse JBS's offer. This refusal came as a surprise to many observers as officials familiar with the matter had stated that many key issues and details had already been discussed and settled.

Following these events, the state of the takeover talks and Sara Lee's intentions regarding the future strategy of the company were unclear to external parties. With no bidder on the horizon, a split-up of the company into a meat and coffee business became more likely and was first mentioned in the press on 6. January 2011.

Some days later, Apollo announced that it intended to reenter the takeover race with an increased bid between $18 and $19, thus exceeding JBS's earlier bid. Sara Lee rejected this offer with the comment that the PE-house shouldn't even bother making a formal proposal as the price is too low. Shortly after, JBS also announced that they would reconsider their initial price per share in order to avoid the collapse of the previous takeover efforts. JBS's offer was believed to be around $19-$20 and backed by Blackstone Group. Around this time, Sara Lee stated that it would from that point forward only consider offers which go beyond the $20 frontier. JPMorgan analyst Terry Bivens said that Sara Lee may even reach a price of $23 per share.

Since no bidder crossed the mentioned boundary of $20 with their bids, Sara Lee suspended all takeover talks on 28. January 2011. Along with this decision, Sara Lee announced that it would pursue a split-up into the meat and coffee business as separated companies.

Sources:
http://online.wsj.com/article/SB10001424052748704034804576025920799954668.html
http://online.wsj.com/article/SB10001424052748704610904576031932701090682.html?KEYWORDS=sara+lee+jbs
http://dealbook.nytimes.com/2010/12/19/sara-lee-talks-with-jbs-hit-bump-over-price/?ref=saraleecorporation
http://blogs.wsj.com/deals/2011/01/10/the-contenders-vying-for-sara-lee/?KEYWORDS=sara+lee+jbs
http://www.bloomberg.com/news/2011-01-09/jbs-is-said-to-consider-another-takeover-offer-for-sara-lee.html
http://www.reuters.com/article/2011/01/25/us-saralee-jbs-idUSTRE70O5NS20110125