Sara Lee Corp. (SLE) announced that it has completed its $87 million buyout of Aidells Sausage Co. from Encore Consumer Capital, a private equity firm that invests exclusively in leading consumer products companies. The deal was originally announced on May 5, 2011.
Sara Lee said the deal will help broaden its presence in the premium meats category and strengthen its North American meat business.
Aidells pioneered the premium sausage category and offers a full product line of poultry-based products, such as Chicken & Apple, Cajun Style Andouille and Roasted Garlic & Gruyere Cheese sausages. Aidells also offers a line of meatball products in flavors such as Teriyaki Pineapple and Buffalo-Style.
Management at Sara Lee also revealed that Aidells will form the cornerstone of the newly formed Gourmet Foods group within Sara Lee and will undoubtedly continue to expand holding the leadership position in the premium sausage category.
Earlier this month, Sara Lee said that it had been considering selling its international bakery and North American refrigerated dough businesses. The Downers Grove, Ill., company has already sold several business lines and is in the process of splitting into two companies, one taking care of its North American food businesses and the other focusing on European coffee, tea and bread.
Recommendation
We are encouraged by Sara Lee’s focus on leveraging its consumer brands to generate sales growth in the range of 4% to 5% and earnings growth in the range of 5% to 8% by next year.The company intends to bring in changes in the organizational structure and product portfolio, thereby improving operational efficiency.
However, commodity-price inflation, competition in the branded food industry along with presence of stiff competitors like Kraft Foods Inc. (KFT) and Tyson Foods Inc. (TSN) are matters of concern.
Currently SLE holds a Zacks #3 Rank. On a long-term basis, we maintain a Neutral rating on the stock with a short-term Hold rating.
