Somebody Doesn't Like Sara Lee

Sara Lee CEO Brenda Barnes' timing on trying to sell the company's European household-products unit, which accounts for 15 percent of the company's sales, may seem off.

After all, she came to Sara Lee in February 2005 bent on focusing the company on its core food businesses. She's long been under pressure to dump the unit. And the mergers and acquisitions market isn't exactly robust just now.

What took her so long? Well, a look back at the mess she inherited should put things in context. Sara Lee in 2005 was a ridiculous hodgepodge of unrelated businesses. It sold shoe polish, breakfast sausages, and brassieres. Barnes has spent much of her tenure conducting the business of selling businesses, as well as consolidating back-office operations. It's been a triage operation.

And the European unit, besides being a major source of revenue, is at least profitable. The Wall Street Journal on Friday reported that the company had hired Goldman Sachs to sound out possible buyers, including Unilever, Reckitt Benckiser Group, S.C. Johnson & Son, and Colgate-Palmolive. The Journal reported that the unit could fetch more than $2 billion.

But, the paper cautioned, it is "unclear if any deal will occur."

Bloomberg News gives a few reasons why. Reckitt, headquartered in the English trading estate of Slough (home of the Wernham Hogg paper company branch office managed by David Brent), is focused on acquisitions in emerging markets, one analyst told Bloomberg. And many of Unilever's personal-care products compete directly with Sara Lee's.

And then there's the moribund M&A market. This is not a great time to be selling consumer-oriented businesses. "I'm not sure they've built their brands in a way that will make them hugely attractive," Rob Mann, an analyst at Collins Stewart, told Bloomberg. "Intuitively, I don't think they will get the greatest multiple."

Last August, ValueAct Capital Management, an activist hedge fund that tends to pressure companies to shed noncore assets, got a seat on Sara Lee's board, though its hasn't said anything in public. Since then, Sara Lee's stock price has been cut in half. ValueAct owns about 5 percent of the company.

Sara Lee last month reported a quarterly loss of $17 million, a heart-stopping drop from the $182 million it had earned in the year-earlier period. Even if Sara Lee doesn't get what it might have gotten from the European unit, say, three years ago, dumping it now might put the company in a much better position to emerge from the recession much more tightly focused.