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Sara Lee Corporation (NYSE:SLE), manufacturers of Ball Park Franks, Jimmy Dean sausage, and Sara Lee fatty baked snacks, has completed the spin-off of its Hanes division to form a separate company, Hanesbrands, (NYSE:HBI), which began trading yesterday, September 6. Current Sara Lee shareholders received one share of Hanesbrands stock for every eight shares of Sara Lee. The Hanesbrands moniker includes some very common names: Hanes underwear, made famous by Michael Jordan in his series of "you have been briefed" ads; Bali and Wonder bras; as well as L'eggs and Just My Size hoisery.
Several years ago, Sara Lee Coroporation management decided to reduce the range of the portfolio of brands that had grown to cover snack foods, beverages, as well as household and body care products, and a line of intmate and casual clothing. One does have to wonder whoever thought it was a good idea to merge fatty snacks with an underwear company in order 'to achieve transformational synergies' or some such business lunacy. Probably best not to think about the image too long.
Approximately 95 million shares of Hanesbrands stock were distributed to Sara Lee stockholders in the transaction. Sara Lee Corporation received $2.4 billion for the stock from Hanesbrands. In its first day of trading, Hanesbrands stock closed at $22.20, up $1.90, with 3.7 million shares trading hands.
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Reader Comments (Page 1 of 1)
9-16-2006 @ 3:47PM
Homeimpovementninja said...
I featured Hanes on my Ninja Stock Picks (tm) on my blog. I much prefer the spinoff to the parent. Sara Lee is a mediocre food company, but Hanes is number or two in every segment it competes in. According to my quickie analysis using Value Line, every apparell company in the VL Survey trades at about 12-14 times earnings, with some as high as 17. At the current pro forma earnings of 1.80 a share, the valuation should be between $21.50 - 25. (Or $30 if you use the 17 multiple). It's currently at the low end of the range. Maybe it doesn't deserve the 17 multiple because of the debt that Sara Lee foisted on it, or the poison pill provisions, but since it's a the best in breed in each of it's markets, it certainly deserves a higher price than the 12x multiple it currently trades at.