While nobody does it like Sara Lee (NYSE:
), it appears the global manufacturer has decided its
international coffee and tea business can
from the meats, bakery and household products it distributes. The
news calls into question why recent beverage acquisitions were
made by the company - were there plans to buy and sell-off all
SLE has been going through transitional phases as of late,
with much its business being acquired by other companies. In
October 2011, the brand's refrigerated dough business merged with
Ralcorp Holdings (NYSE:
), with another sale in November of its Fresh Bakery business.
Most recently, the J.M. Smucker Company (NYSE:
) took on SLE's North American coffee and hot beverage business
in January, with tea and coffee acquisitions taking place since
With all the pieces of the pie being sliced and served to
different companies, it is no wonder The Sara Lee board
unanimously approved a 1-for-5 reverse stock split of shares of
the common stock following its separation from the coffee and tea
During SLE's most recent earnings call, the coffee and tea
category of the brand saw strong pricing with sales of singlets
and capsules doing well. While lower volumes offset the positive
trend, the full year outlook on the business appeared to be
"Looking ahead to the full year, we are beginning to see
commodity costs decline in the coffee and tea business and
stabilize in our meat business. This should have some beneficial
impact on our fourth quarter results, particularly for coffee and
tea, and gives us confidence that we will end up within our
existing guidance ranges," CFO Mark Garvey said on the May 3rd
While no answer has been given as to why the split is
happening, the distribution of the CoffeeCo has been slated for
June 28 after market close. Shareholders can expect CoffeeCo to
pay a $3.00 per share special dividend, with the brewer then set
to merge with a subsidiary of D.E MASTER BLENDERS 1753.
Could the reason for the separation be the constant success
beaneries such as Starbucks (NASDAQ:
) and Green Mountain Coffee Roasters (NASDAQ:
) are experiencing? With Keurig-cup sales continuing to ramp
higher over recent months, the competition may have been too much
for SLE to take.
SLE may continue to part ways with portions of its business
that would be better served under additional or new management,
but one thing is for sure; coffee and tea will no longer be a
part of "the joy of eating".
SLE closed yesterday at $20.90, up 7.51% year-over-year.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.