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    Sara Lee, Smucker Strike $350M Deal for Foodservice Coffee and Tea Ops

    In addition, the Department of Justice approved Sara Lee's agreement to sell its North American fresh bakery division to Grupo Bimbo.

    CHICAGO -- Sara Lee Corp. is selling the majority of its North American foodservice coffee and tea operations to The J.M. Smucker Co. for $350 million. The deal is expected to close in early 2012, and the two companies will also establish a long-term partnership to collaborate on liquid coffee innovation.

    "In recent years, our North American coffee business has been foodservice-based and largely unbranded, which is a challenge in a highly competitive marketplace," said Jan Bennink, executive chairman of the board, Sara Lee Corp. "Our decision to sell a major part of this business to Smucker is an example of Sara Lee Coffee and Tea's renewed focus on sustainable, profitable growth and part of our mandate to create the strongest possible pure-play company."

    In addition, Bennink reported, "Smucker, which owns leading U.S. coffee brand Folgers, and Sara Lee have also entered into a licensing agreement to cooperatively develop liquid coffee technologies to drive long-term growth. We look forward to working with Smucker, and to the promising future of our new pure-play coffee and tea company."

    As a result of the licensing and support agreement, Sara Lee will receive a 10-year income stream totaling approximately $50 million, plus growth-related royalties, which will help cover its research and development and other support expenses.

    "This transaction further strengthens our position as a leading North American coffee company," said Richard Smucker, CEO of The J.M. Smucker Co. "The addition of liquid coffee concentrate to the Smucker portfolio aligns with our desire to compete in all forms of coffee, adding to our roast and ground, single-serve, instant and ready-to-drink platforms. The innovation partnership further allows us to collaborate on new technologies in the liquid coffee category for the foodservice market."

    In fiscal 2011, the foodservice beverage business generated net sales of approximately $530 million, of which approximately $285 million was associated with the assets sold to The J.M. Smucker Co. Following the execution of the agreement, approximately 450 people will transfer to Smucker.

    Sara Lee also announced that Senseo coffee in North America will be discontinued as of March 31, 2012, with the exception of select online channels. Sara Lee plans to sell or close the remaining assets of the North American coffee business, and expects to provide an update on the process before the end of this year.

    The deal with Smucker comes days after the U.S. Department of Justice (DOJ) approved an agreement for Sara Lee to sell its North American Fresh Bakery business to Grupo Bimbo S.A.B. de C.V. The transaction, which is expected to close Nov. 5, is now awaiting approval by a federal judge.

    As part of the agreement with the DOJ, Grupo Bimbo is required to divest certain brands and assets in Omaha, Kansas City, Oklahoma City and central Pennsylvania. In addition, Grupo Bimbo will be required to divest certain assets and the perpetual rights to the Sara Lee and Earthgrains brands for fresh bread, buns and rolls in California. As a result of these remedies, the parties have agreed to reduce the purchase price, which includes the assumption of debt, from $959 million to $709 million. As previously agreed, Grupo Bimbo will continue to assume all employee-related commitments, including pension obligations.

    "We're very pleased we've obtained regulatory approval and can now move toward closing this sale," said Marcel Smits, CEO of Sara Lee Corp. "The North American Fresh Bakery business is a great fit for Grupo Bimbo, and this transaction allows Sara Lee to aggressively drive growth in our core coffee and meats categories, as well as return shareholder value."

    Sara Lee reiterated its intention to declare a $3-per-share special dividend on the company's common stock. The exact timing of the dividend payout is still being determined.

    As a part of the North American Fresh Bakery transaction, Sara Lee will retain the right to sell Sara Lee branded frozen desserts and meat products, including sliced deli meats. Grupo Bimbo will have the rights to the Sara Lee brand in the fresh baked goods category globally, with the exception of Australia and New Zealand.


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