Sara Lee Corp. has signed an agreement to sell its PYA/Monarch food service operation to a Dutch supermarket giant for $1.57 billion.

The sale, which also includes a supply agreement between the Dutch firm Royal Ahold and Sara Lee’s U.S. food and beverage manufacturing operations, is expected to close by the end of October, Chicago-based Sara Lee announced Wednesday.

“With the direct sale of PYA/Monarch to Ahold, Sara Lee obtains cash now, eliminates market uncertainty and secures a multiyear supply contract, creating significant value for Sara Lee shareholders,” said C. Steven McMillan, chief executive officer of Sara Lee Corporation.

The sale of PYA/Monarch is part of a plan to narrow Sara Lee’s focus on three product areas in which the company holds strong positions — food and beverage, intimates and underwear, and household products. The reshaping plan, which Sara Lee announced in May, also included plans to split off Coach leather goods, and the divestitures of Champion athletic wear and the International Fabrics division of Courtaulds, businesses that did not fit within the company’s renewed focus.

Sara Lee had $20 billion in sales in more than 140 countries last year. Its food operations have been struggling, in part due to falling bakery sales and lingering fallout from a December 1998 packaged meats recall.

Other well-known Sara Lee brands include Ball Park hot dogs, Hillshire Farm sausages, Sara Lee cakes, Kiwi shoe polish, Endust furniture spray and L’Eggs hosiery.

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By GlobalData

On Wednesday, shares of Sara Lee were up 12.5 cents to close at $18.75 on the New York Stock Exchange, where U.S. shares of Ahold were up 37.5 cents to close at $29.063.