Sara Lee Look to Spin Off Coffee and Tea

Sara Lee

said on Friday that, if it goes ahead with plans to spin off its international coffee and tea business later in 2012, shareholders will receive stock valued at up to$4.55 billion. That has to be seen as good news for those shareholders, with the company looking to up and leave from Utrecht to Amsterdam during the second half of this year, as it looks to be closer to key Euro markets. According to the

, the SLE assets will be held by DE International Holdings, and that group is planning to list the stock on the NYSE Euronext in Amsterdam. Apparently, DE is also looking to change the corporate name prior to the completion of the spinoff. “With over 250 years of history, the Coffee & Tea business has solid market positions and deep roots in many European markets,” Sara Lee Executive Chairman Jan Bennink said in a statement. This news comes after SLE has announced plans to split into two distinct businesses – and international coffee and tea business and a meats company. However, it is important to note that both will be public companies when the spinoff is completed somewhere around the midpoint of the year. The spinoff will also result in a $3 special dividend for SLE stockholders. The half of Sara Lee based in Illinois will then focus on that meat business, and the brands it has in its arsenal like Ball Park hot dogs and Jimmy Dead sausage. The company will be responsible for approximately $1.7 billion in debt and around $300 million in cash. After this latest news was released, Sara Lee rose $1.51, or 7.4%, to $21.90 in Friday morning's premarket trading. The coffee business has not had the worst start to the year. Last month, Goldman Sachs released a research report saying that SLE's Coffee Co. business is gaining steam and is poised to enter FY13 with powerful tailwinds at its back (e.g., coffee cost deflation, internal cost cut initiatives, a material step-up in innovation, easy comps). “Additionally, we see upcoming catalysts with (1) favorable tax news possible in coming weeks and (2) ambitious growth plans likely to be unveiled at its inaugural analyst meeting in Amsterdam this March. As we detail within this report, we see a multi-year growth ramp ahead for the business and recommend that investors buy SLE now to effectively take ownership of Coffee Co at a discounted price.” In addition, GS said that Meat Co offers its own appeal with cost cuts fueling earnings growth this year and next. “Sales growth is lagging in Meat Co, but improvement lies ahead and we continue to view the business as having strategic appeal to potential suitors. We do not believe that investors who buy SLE today to own Coffee Co will be disappointed with their position in Meat Co post spin.” On March 2, ValuEngine said that it believed SLE was overvalued. “Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth.”