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Sara Lee Sells Coffee Division to Italian Group

October 27, 2005

By Michelle E. Shaw, The Virginian-Pilot, Norfolk, Va.

Oct. 27–SUFFOLK — Sara Lee Corp. is selling its U.S. retail coffee division to an Italian espresso-maker and owner of a global cafe chain.

The Segafredo Zanetti Group of Italy has agreed to pay $82.5 million for Sara Lee’s operation, which will include its roasting and grinding plant in Suffolk, said Kathleen Gilgunn, corporate spokeswoman. The plant employs about 100 people and is expected to remain open.

Sara Lee’s liquid coffee plant in Suffolk, which underwent a $93 million expansion last year, will remain under the Sara Lee umbrella.

The deal is expected to close by the end of the year, Gilgunn said.

Family-owned Segafredo Zanetti specializes in espresso and develops the product from bean to brew. Relying heavily on franchising, it has more than 500 coffee shops worldwide under the Segafredo Zanetti Espresso Worldwide and Puccino’s names, including Segafredo Zanetti cafes in Miami and Las Vegas.

The Italian company sells more than 62,000 tons of roasted coffee each year. The group bought a Polish coffee-roasting and packaging company in 2002.

Sara Lee purchased Chock Full o’ Nuts Corp. for $238 million in 1999 and the Hills Bros., MJB and Chase & Sanborn coffee brands from Nestle SA the same year. The sale to the Segafredo Zanetti Group includes those brands, as well as various private labels, but doesn’t include Sara Lee’s global Senseo brand, according to a company statement.

Its U.S. coffee retail business generated $213 million in sales for Sara Lee in its 2005 fiscal year, which ended July 2.

Sara Lee plans to use the proceeds from the sale for shareholder dividends, a $2 billion share-repurchase program, debt repayment and its core businesses, the Chicago-based company said in a statement.

News researcher Jakon Hays and Bloomberg News contributed to this report.

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