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Sara Lee Makes Hostile Bid for Courtaulds

By Dan Lalor

LONDON (Reuters) — U.S. food and consumer products firm Sara Lee Corp Monday launched a hostile takeover bid for Britain's Courtaulds Textiles Plc, which dismissed the $166 million bid out of hand as being far too low.

Courtaulds rejection statement said Sara Lee had already indicated it might increase the value of its bid, and thus the 100 pence per share on offer was “opportunistic” after the pair had ``sought to negotiate a price at which the Courtaulds board could recommend an offer.''

Shares in Courtaulds had surged 82 percent to 113-1/2 pence by noon after news of the offer at a 60 percent premium to last Friday's 62-1/2 pence close, and which valued Courtaulds at 103.8 million pounds.

Sara Lee, which approached Courtaulds last Thursday, said its offer would allow shareholders “a full cash exit for their existing holdings and remove any risk and uncertainty . . . in connection with the current challenges facing Courtaulds.”

Courtaulds is a leading supplier to British food and clothing retail giant Marks & Spencer Plc, which accounts for about 40 percent of Courtaulds turnover.

Other British textiles firms have recently been losing their contracts with M&S, itself under pressure to improve its performance amid big falls in sales and profits. In essence, M&S has been moving production to cheaper, overseas factories.

Courtaulds, which employs 20,000 people in 17 countries in Europe, America, North Africa and Asia, said last November it expected annual sales to M&S to increase by at least 60 million pounds from this autumn.

For its part, Sara Lee, headquartered in Chicago, has operations in over 40 countries, markets branded products in more than 140 countries, and employs 138,000 people.

“The combination of Sara Lee and Courtaulds has strong commercial logic and will bring benefits for retail trade customers and consumers which could not be achieved by Courtaulds alone,” chief executive John H. Bryan said.

Courtaulds chairman John Eccles said its value was ``very significantly in excess of 100 pence'' and shareholders “should take no action in respect of their shareholding and should not prejudice the delivery of optimum value by selling any Courtaulds shares in the market.”

Analysts agreed. One at a British bank who last week estimated Courtaulds standalone value as 138 pence per share, said that figure would “obviously have to be revised up, dependent on the extent to which Sara Lee can get additional synergies, which are potentially significant.”

“Sara Lee's offer is what Courtaulds say it is, an opportunistic offer.”

Courtaulds Name To Stay
The Courtaulds name would remain and its operations remain independent units, Sara Lee said, adding it would accelerate development of Courtaulds brand names, such as Gossard, Berlei, Aristoc, Well, and Lyle & Scott.

Sara Lee said it had developed a strong local European management team through which it could inject its “world-class marketing expertise.”

Acquiring Courtaulds would provide an opportunity to achieve a leading position in several key categories across both branded and store brand lingerie, underwear and legwear, Sara Lee said.

“This market position will translate into better purchasing conditions and lower manufacturing cost.”

Courtaulds chief executive Colin Dyer said Sara Lee's approach meant it clearly endorsed key elements of Courtaulds strategy. “We are the world's largest private label clothing manufacturer, and are developing our high profile clothing brands.”

Sara Lee's brands include Douwe Egberts, Kiwi, Radox, Playtex, Pretty Polly and Wonderbra. It made $1.14 billion profit in the year to last July 3, with sales of $20 billion.

Sara Lee is being advised by U.S. investment bank Goldman Sachs.

Courtaulds said it would publish its 1999 results within a week.