Sara Lee Receives Private Letter Ruling and Provides Information on Pending Spin-Off

 
TIDMSRL

Sara Lee has received a Private Letter Ruling and is now able to provide additional details about the spin-off of its international Coffee & Tea business.

The spin-off is expected to be completed by the end of June 2012. Post spin-off, the Coffee & Tea business will be domiciled as a new publicly traded company incorporated in the Netherlands.

"We are very pleased to reach this major milestone in our spin-off process and to provide our shareholders with additional news about the domiciling of the Coffee & Tea company and the payment of the $3.00 dividend," said Sara Lee Executive Chairman Jan Bennink. "With over 250 years of history, the Coffee & Tea business has solid market positions and deep roots in many European markets. Domiciling Coffee & Tea in the Netherlands allows management to be close to its key Western European markets and effectively manage its global portfolio."

Additional Spin-Off Details

In order to execute the spin-off and domiciliation, Sara Lee will take the following steps. First, Sara Lee will spin-off all of the shares of its U.S. subsidiary that holds its Coffee & Tea business. Immediately after this spin-off occurs, the U.S. subsidiary will pay a $3.00 special dividend to Sara Lee shareholders. Sara Lee expects that this dividend will be eligible for qualified dividend treatment. Subsequently, a new Dutch company will be established as the parent company for the Coffee & Tea business and its shares will be distributed to Sara Lee shareholders. The U.S. Coffee & Tea company will become a subsidiary of the Dutch public parent and a holding company for the Coffee and Tea operations.

As a consequence of the spin-off and subject to final approval of the spin by the Board, Sara Lee expects to release approximately $700 million of deferred tax liabilities currently on its balance sheet. This reversal is expected to occur in the fiscal quarter of the spin-off.

The Private Letter Ruling confirms that key requirements for tax-free treatment of the spin will be satisfied. Since the IRS does not rule on certain elements of the spin, the company expects to receive an opinion of counsel that those additional elements should be satisfied.

The domiciliation of the Coffee & Tea business in the Netherlands is expected to result in U.S. shareholders incurring U.S. tax on any gain attributable to their Coffee & Tea shares. Sara Lee will provide further guidance to its U.S. shareholders on how this gain is computed closer to the date of the spin-off.

Coffee & Tea Company Intends to Move its Headquarters to Amsterdam

The Coffee & Tea business also intends to move its operating headquarters from Utrecht to Amsterdam in the second half of calendar year 2012. Amsterdam was chosen as the location for the new headquarters in the Netherlands due to its central location and accessibility to an international labor market.

Update on Capital Structure

At the time of the spin-off, Sara Lee now expects to have total debt of approximately $1.7 billion and approximately $300 million in cash.

About Sara Lee Corporation

Sara Lee Corp. (NYSE: SLE) and it's leading portfolio of food and beverage brands, including Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Pickwick Teas, Sara Lee and Senseo, generate nearly $8 billion in annual net sales from continuing operations and employ approximately 20,000 people worldwide. In January 2011, Sara Lee Corp. announced that it will divide the company into two pure-play publicly-traded companies, one focused on the international coffee and tea market and the other on North American meats. For more information on the company, please visit www.saralee.com.

 
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