JBS, equity firms could team up on Sara Lee bid

By Reuters
Posted Jan. 11 at 12:52 p.m.

JBS, the world’s top beef processor, could team up with a group of buyout firms as it seeks alternatives to win control of Sara Lee Corp., a source with knowledge of the plans told Reuters Tuesday.

Private equity firms have pursued Sao Paulo-based JBS since reports about a potential bid for Sara Lee arose late last year, the source said. No accord over a joint bid has been reached, said the source, who declined to be quoted by name because the talks remain private.

Asked whether JBS could join with private equity funds for the purchase, the source said, “it is certainly an alternative.”

“They have pursued us, but there are no preferences or signed commitments at this point,” the person said, adding that the Brazilian beef company is interested in Sara Lee’s retail and food service business, which includes coffee and meats.

Shares of Sara Lee rose more than 2.5 percent Monday on reports that a group of private equity firms is interested in a buyout of its coffee and meat unit.

The group includes Apollo Global Management , a source familiar with the situation said on Sunday.

Sara Lee shares recouped some of their losses. The stock fell 0.9 percent, to $18.04, Tuesday on the New York Stock Exchange, after losing as much as 1.6 percent earlier in the day. The stock gained 17 percent since the start of December.

Voting shares of JBS rose 1.3 percent in Sao Paulo to 7.09 reals. The stock shed about a third of its value in the past year.

Sara Lee, which has a range of business apart from the retail unit, is valued around $12.5 billion by a number of analysts, but the source used a valuation of around $11 billion for the company.

Integrating JBS’ U.S. unit and Sara Lee’s coffee and meat processing business could create value by providing a home for the trimmings of JBS’s cattle and pig slaughtering operations, analysts say. The unit could fetch $3.3 billion in a sale, Credit Suisse wrote in a report last month.

The deal could also help JBS boost its presence in processed foods, making profit margins more stable. JBS could further gain by reducing its reliance on commodities and turning into a key supplier of meats to rival food processors.

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