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Sara Lee: Spinning off value


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by Elliott Gue, contributing editor Personal Finance

For at Sara Lee (SLE), we expect the planned spin-off planned spin-off of its international coffee and tea business to pay off for shareholders.

Volumes in the international coffee and tea business were down in the second quarter ended Dec. 31, 2011, largely because of flooding in Thailand that disrupted sales.

Despite this headwind, Sara Lee in its second quarter managed to grow net sales by 6.1 percent, to $2 billion— an impressive result after the company ramped up its marketing spending by 20 percent year over year. Sara Lee also increased its market share to record levels in France and Spain.

Following the split, the second division will focus on Sara Lee’s existing North American packaged-food and meats product categories.

Underlying trends in meats remain strong; Sara Lee has reported particular success with its Jimmy Dean packaged breakfast items.

Spin-off IPOs can also generate substantial returns for investors. The simplified structure can unlock unrealized value within a larger corporation or make a company’s growth story easier for the market to understand. Buy Sara Lee Corp under 22.

Learn more about this financial newsletter at Personal Finance.

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