Analysts Like Bimbo/Sara Lee

A potential acquisition of Sara Lee’s bread business by Grupo Bimbo gets the approval of analysts, who say the deal would be non-dilutive to Sara Lee, while Bimbo would likely be able to improve the unit’s margins. Deutsche Bank runs potential Ebitda multiples for the acquisition under a variety of scenarios and prices. “The $1.3bn case should probably be everyone’s base case,” days Deutsche. It adds that this would be “attractive” if a sale includes all of Sara Lee’s baking assets, such as operations in Spain and Australia. Deutsche says a $1.3bn price would yield a 7.2x EV to 2010 Ebitda and 6.6x 2011E Ebitda. If Bimbo were to pay the same price for only the North American assets, the multiple would rise to 13.0x to 2010A Ebitda. The Spanish operations include assets built by Bimbo’s founding family and later acquired by Sara Lee. According to Deutsche, Bimbo had tried and failed to reacquire the assets from Earthgrains. Meanwhile, Sara Lee would help expand Bimbo’s already significant presence in the US. The market now represents 43% of net sales, compared with the 46% that come from Mexico. Bimbo greatly expanded its presence in the US with the $2.5bn acquisition of Weston brands including US brands Arnold’s, Boboli, Brownberry, Entenmann’s, Freihofer’s, Stroehmann and Thomas’ in 2008. Acquiring Sara Lee would help provide Bimbo with more of a national footprint, with penetration of the Midwest, Southeast and Southwest markets, according to John Baumgartner, analyst with Telsey Advisory Group. In regions where Bimbo and Sara Lee overlap, Bimbo will be able to immediately consolidate delivery routes to improve operating margins, Baumgartner says. Bimbo declines to comment on speculation it is now the lead bidder for the business. Bimbo is said to have retained Atlas Advisors for the acquisition.