Sara Lee Shares Rise on Bread Sale Report

CHICAGO (Reuters) – Shares of Sara Lee Corp (SLE.N) rose more than 2 percent on Tuesday after reports that the company was shopping its bread business.

A Sara Lee spokesman declined to comment on the reports on Crain’s Chicago Business and the Chicago Tribune websites.

Crain’s reported in a story dated Monday that Hostess Brands Inc and Campbell Soup Co’s (CPB.N) Pepperidge Farm unit had shown interest in Sara Lee’s bread unit. Spokesmen for Hostess and Campbell could not be reached for comment.

The North American bakery business had $2.2 billion in sales in the most recent fiscal year, about 17 percent of total revenue for the company, which also owns Hillshire Farm deli meats, Senseo coffee and other food brands.

The Wall Street Journal reported that Sara Lee had not yet arranged an auction for the unit, which could fetch at least $1 billion. According to the article, the company’s advisers had reached out to companies and private-equity firms.

Bloomberg reported that Sara Lee had hired Bank of America Corp (BAC.N) as an adviser.

Sara Lee has sold several businesses over the years, including Hanesbrands apparel and its Ambi Pur air freshener business to focus on food and beverages.

The company’s bread business has encountered stiff price competition in a market closely tied to wheat prices.

Morningstar analyst Erin Swanson said that when buying bread, people “tend to consider price rather than brands.”

Talk of Sara Lee shopping its bread business comes as the company’s Chairman and Chief Executive Brenda Barnes is on medical leave after having a stroke in May.

Sara Lee is also trying to complete the sale of much of its European household and body care products business, so some analysts said it may not be ready to sell its bread business. 

“I don’t think they are right now, but that wouldn’t surprise me,” D.A. Davidson analyst Tim Ramey said of an eventual sale of the business. “They appear to be less committed to it.”

In the options market, two analysts cited call buying in the September $15 strike, as investors positioned for further gains within the next two months. Overall option volume was 13.3 times normal levels, with 8,386 calls and 718 puts traded on the day, according to option analytics firm Trade Alert.

Sara Lee shares ended up 32 cents at $14.50 on Tuesday. (Reporting by Brad Dorfman and Doris Frankel in Chicago and Helen Chernikoff in New York, editing by Matthew Lewis)