Sara Lee may pick up Wonder, Hostess brands

Sara Lee may pick up Wonder, Hostess brands

Sara Lee may pick up Wonder, Hostess brands

The demise of Wonder Bread could be a boon for Sara Lee.

Sara Lee Corp. CEO Brenda Barnes is hunting for acquisitions, and Interstate Bakeries Corp., the maker of Wonder, as well as Hostess cupcakes and Twinkies, could be a fix for her sagging bread business.

Since Ms. Barnes said last month she is ready to do deals, industry analysts have zeroed in on potential targets: Oscar Mayer meats, Folgers coffee and Interstate's bread and snack-cake brands. Interstate, which is trying to reorganize in Bankruptcy Court, appears the most plausible near-term option because of its availability and strategic fit with Sara Lee. The company is seeking a buyer for all or parts of its business.

Ms. Barnes could buy bakeries from St. Louis-based Interstate to better distribute Sara Lee brands across the country. Such a deal would help create a bread company with national reach, giving it more scale in a business with dozens of regional rivals. Boosting bread sales is important because the money-losing division has been a drag on Ms. Barnes' turnaround plan for the company.

"They will look to expand their bread business because they have talked about trying to make Sara Lee a national bread brand," says Colin Symons, chief investment officer with Pittsburgh-based Symons Capital Management Inc., which owns around 400,000 Sara Lee shares.

Alexia Howard, an analyst in New York with Sanford C. Bernstein Research, says Ms. Barnes probably will take a close look at Interstate because she could gain bakeries in the Northeast, where Sara Lee has no bread sales.

"Sara Lee needs to fill in its hole in the Northeast to be a credible national player," Ms. Howard says.

Ms. Barnes won't comment on specific targets, but says any acquisition would have to fit within Sara Lee's U.S. bread and meat businesses or its overseas coffee, household and body care lines.

Oscar Mayer would be a good pairing with Sara Lee's Jimmy Dean, Hillshire Farm and Ball Park brands, but Oscar Mayer's parent, Northfield-based Kraft Foods Inc., doesn't appear to be selling. Procter & Gamble Co.'s Folgers is for sale but may make more sense for a company focused on the U.S. coffee market, analysts say.