Sara Lee Corporation announced that it has entered into a definitive agreement for the sale of its branded apparel business in Europe to an affiliate of Sun Capital Partners, Inc. According to the terms of the agreement, the Sun Capital affiliate will pay Sara Lee 100 million in cash plus potential contingent payments based on the future performance of the business under the purchasers ownership. Under the agreement, Sara Lee would receive 49% of the first 204 million of cash distributed from the business following the closing of the transaction and a smaller percentage of cash distributions in excess of this amount, subject to purchase price adjustments. In addition, the purchaser will assume an estimated amount of approximately 70 million of pension and related liabilities outside of the United Kingdom. Sara Lee will retain no equity interest in the business after the sale to the Sun Capital affiliate closes.
“We are pleased with the economics of this deal and are happy to share in the future growth of this business under the Sun Capital affiliates ownership. This divestiture is another key step in our transformation, which is a bold and ambitious plan designed to simplify Sara Lee and focus on our core food, beverage, and household and body care businesses,” said Brenda C. Barnes, chairman and chief executive officer of Sara Lee Corporation. “In just nine months, our ongoing transformation initiatives already have begun to build the momentum needed to drive long-term, profitable growth for Sara Lee.”
Completion of the transaction is subject to regulatory authority approvals and other customary conditions. The transaction is expected to close by the end of January, 2006.
After the closing of this transaction, it is probable that Sara Lee will need to contribute approximately 62 million to fund certain retained pension obligations in the United Kingdom. Upon funding the plans, the company expects that the plan trustees will purchase annuities for plan participants and that this will result in Sara Lee recognizing a material settlement loss. The exact amount of the expected funding and settlement loss will depend on the fair value of assets and the cost of annuities purchased.
On Sept. 30, 2005, Sara Lee announced that it was in exclusive negotiations regarding the sale of its European branded apparel business with an affiliate of Sun Capital Partners. Since that time, Sara Lee and the Sun Capital affiliate have continued to negotiate toward a final agreement, while management has conducted and will continue to hold information sharing and consultation meetings with employee representatives from the appropriate organizations.
The enterprise being sold by Sara Lee includes its branded apparel businesses in France, Germany, Italy, Spain, the United Kingdom and throughout Eastern Europe. This business markets such well-known brands as Dim, Playtex, Wonderbra, Abanderado, Nur Die and Unno and generated nearly $1.2 billion in sales in fiscal year 2005, which ended July 2, 2005.
Sara Lee Courtaulds, the U.K.-based division that manufactures private-label clothing for retailers, is not part of this sale. The company will continue to explore its options in regard to the sale of the Sara Lee Courtaulds business, which generated nearly $560 million in sales in fiscal year 2005.
