USA: DBRS comments on Sara Lee's purchase of Earthgrains
The Sara Lee Corp. ("Sara Lee" or "the Company"), one of the largest global branded consumer products companies, has announced plans to purchase the Earthgrains Company for cash considerations totalling $2.8 billion, including $978 million of assumed debt. This acquisition should have several positive results: (1) It is expected to quadruple Sara Lee's bakery sales to more than $3.4 billion as they acquire the second-largest American bread company. Sara Lee's Food and Beverages division will now provide more than $10 billion (near 50%) of Sara Lee's total revenues. (2) Earthgrains brings many successful brands that can be leveraged into the Sara Lee banner. (3) Earthgrains brings Sara Lee a strong direct-store distribution (DSD) system with a network covering 34 states, and more than 50% of the American population. (4) The Earthgrains purchase bolsters Sara Lee's European presence with strong brands in France and Spain. (5) Earthgrains' strong presence in refrigerated dough (40% of revenues) will give Sara Lee an entry into this market.
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