Brazilian meat giant JBS, which has been linked to a takeover bid for Sara Lee, has been warned not to “over-pay” for the US food group by a leading industry analyst.

Reports yesterday (20 December) suggested that Sara Lee’s management have been in talks to sell the business to JBS for a few months.

However, according to Bloomberg, the Jimmy Dean foods maker turned down an offer from JBS, deeming it “too low”. 

It is understood that the bid was less than the intraday high for Sara Lee’s share price on Friday (17 December), when the Wall Street Journal reported the two companies were in talks.

That day, Sara Lee’s stock reached a high of $17.62 and closed at $17.26. At the closing price, Sara Lee was valued at $11bn.

However, Morningstar analyst Erin Swanson said any offer above her “fair value estimate” of Sara Lee’s share price of $15 a share would over-value the business.

“Its shares are now trading at around ten times our fiscal 2011 EBITDA estimate – a rich multiple, given that Sara Lee lacks the brand strength and category positioning enjoyed by many of its larger peers and has struggled disproportionately with volatile input costs and weak economic conditions,” Swanson said yesterday.

Shares in Sara Lee were trading at $17.48, down 1.19% at 10:18 EST today.

Swanson added that, while a deal is “still viable”, an acquisition at a level around the current market price would represent “a substantial overpayment”.

“As a result, we don’t expect a bidding war to ensue,” Swanson said. “The sale of the bakery business may deter private equity firms looking to buy the consolidated business cheaply and sell off its underperforming business lines, but we believe a number of firms are looking to put excess capital to work in the consumer sector through acquisitions.”

Nonetheless, Swanson said she still considers Sara Lee to be a takeover target, with potential interest from both strategic and financial suitors, particularly she said, given that its “corporate oversight remains in question”. CEO Brenda Barnes stepped down for health reasons in August, and Swanson believes this makes the firm “vulnerable to bids”.

The future of Sara Lee has been in question for some months. The firm sold off its North American fresh bakery operations to Mexico’s Grupo Bimbo in a deal worth $959m last month.

The sale followed months of speculation over Sara Lee’s domestic bread arm and the company said the sale meant it could focus on its protein and coffee operations.