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Unformatted text preview: h, brand leadership, multiple distribution channels, product innovation, and competitive cost structure. By early 2002, the company had approved the disposition of 18 noncore businesses and had received at least $3 billion from sales and IPOs. Among the first brands it targeted were sportswear and accessories and food services. Through IPOs, it spun off Coach, a premier leather goods business, and food distributor PYA/Monarch. Other transactions included the sale of several European food, apparel, and textile operations and the Australasian intimates and underwear business. At the same time, Sara Lee began to reorganize business units, centralizing many operations 719 In Practice to maximize overall efficiency, and it used sales proceeds to acquire strong brands for its core lines. Its purchase of the Earthgrain’s Company bakery brought a stateof-the-art direct store distribution system on which to build Sara Lee’s national bakery business. On the international scene, Sara Lee became Brazil’s number-1 coffee company with the acquisition of Uniao. Sources: Adapted from Julie Forster, “Sara Lee: Changing the Recipe—Again,” Business Week (September 10, 2001), pp. 125–126; “Sara Lee Corporation Reports Increased Sales and Earnings for Fiscal 2001,” Business Wire (August 2, 2001); “Sara Lee Corporation Sells U.K. Bakery Business to Hibernia Foods; Company Continues to Reshape Business Portfolio Through Strategic Divestitures,” Business Wire (June 4, 2001); and “Sara Lee Sells Off Key Business Units to Focus on Leading Brands,” Food & Drink Weekly (June 5, 2000); all downloaded from Firms divest themselves of operating units by a variety of methods. One involves the sale of a product line to another firm. An example is Paramount’s sale of Simon and Schuster to Pearson PLC to free up cash and allow Paramount to focus its business better on global mass consumer markets. Outright sales of operating units can be accomplished on a cash or stock swap basis via the procedures described later in this chapter. A second method that has become popular involves the sale of the unit to existing management. This sale is often achieved through the use of a leveraged buyout (LBO). Sometimes divestiture is achieved through a spin-off, which results in an operating unit becoming an independent company. A spin-off is accomplished by issuing shares in the divested operating unit on a pro rata basis to the parent company’s shareholders. Such an action allows the unit to be separated from the corporation and to trade as a separate entity. An example was the decision by AT&T to spin off its Global Information Solutions unit (formerly and now NCR, which produces electronic terminals and computers), to allow AT&T to focus better on its core communications business. Like outright sale, this approach achieves the divestiture objective, although it does not bring additional cash or stock to the parent company. The final and least popular approach to divestiture involves liquidation of the operating unit’s individual assets. 720 PART 6...
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This document was uploaded on 01/19/2014.

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