Sara Lee (NYSE:SLE) May Break Up if Better Offer Doesn't Come

With the intense interest in Sara Lee (NYSE:SLE) as a takeover candidate, the company has the luxury of being in a strong position, based on tax advantages associated with breaking up into two companies. That allows them to seek a much higher offer, although it also limits them on what suitors would be willing to pay to acquire them.

Canaccord says, "Cash-rich private equity firms are lining up to buy Sara Lee. According to various media reports, the coffee and meat company has received a takeover offer from a group of investors that includes Apollo Global Management, Bain Capital and TPG Capital. This follows previous offers from Brazilian meat processor JBS and buyout firm Kohlberg Kravis Roberts (KKR), which were rejected by Sara Lee’s Board. The Apollo group has apparently offered as much as $20 a share for Sara Lee, or $13 billion, and with analysts estimating the company’s worth at $12.5 billion, this seems to be an attractive bid. U.S.-based Sara Lee has been examining various options such as selling itself or splitting itself up into meat and beverage units for the past few months. The company seems to be leaning toward a break-up, unless it receives a takeover offer high enough to compensate for the tax-free advantages of a split into two companies. It is expected that JBS will submit a revised offer, but media reports say this has yet to arrive. Is a bidding war on the horizon? If successful, the Apollo purchase would be among the largest leveraged buyouts since the credit crisis."

Sara Lee was trading at $18.61, up $0.25, or 1.36 percent, as of 1:54 PM EST.