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Government challenges Sara Lee deal


Grupo Bimbo may sell certain brands, infrastructure


By MATEUSZ PERKOWSKI


Capital Press


The Grupo Bimbo food company must sell off several baking facilities in the U.S. because the federal government believes a planned merger will suppress competition in the sliced bread market.


Last year, the Mexico City-based corporation agreed to buy the North American bakery business of rival food manufacturer Sara Lee for roughly $960 million.


The U.S. Justice Department's Antitrust Division alleges that the acquisition would "eliminate the substantial head-to-head competition" between the two companies, potentially leading to higher sliced bread prices, according to a complaint filed in federal court.


The government's lawsuit specifically targets cities in California, Pennsylvania and the Midwest where the takeover would give Grupo Bimbo a market share of more than 50 percent in the sliced bread sector.


Although the complaint asks a federal judge to block the acquisition, the Justice Department simultaneously filed a consent decree that, if approved by a judge, would end the litigation and allow Grupo Bimbo to move forward with the deal.


The settlement, which Grupo Bimbo has agreed to, requires the firm to sell off plants and equipment used to make sliced bread in the relevant markets, as well as the trucks and distribution channels used to deliver the product.


Grupo Bimbo would also have to sell off the right to use brand names for bread like EarthGrains, Sara Lee, Holsum, Milano and Mrs. Baird's in certain key markets.


If the company isn't able to divest all of these assets in the time period specified in the consent decree, the court would appoint a trustee to oversee the remaining sales.


Grupo Bimbo estimates that the divestitures will reduce sales by about $155 million. When the deal was announced in November 2010, the Sara Lee baking business was expected to add $2 billion to the company's revenues.


The company has been increasing its foothold in the U.S. food market since the 1990s, when it began buying major baking companies like Pacific Pride Bakeries and Mrs. Baird's Bakeries.


Grupo Bimbo also recently announced it plans to expand beyond its current markets in the United States, Mexico and Latin America by acquiring Sara Lee's baking divisions in Spain and Portugal for more than $150 million.


Sara Lee is also selling off its bakery division in France. Its baking operation in Australia is undergoing "strategic review," the company said in a financial document.


Earlier this year, the corporation's board of directors decided to split Sara Lee into two publicly-traded "pure play" companies in 2012. One company would focus on its meat and prepared food brands, while the other would focus on its international beverage business.



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