Sara Lee Bids $321 Million for Athletic Wear Maker

Sara Lee Corp. carved out a bigger piece of the consumer goods pie Monday, agreeing to buy Champion Products Inc., in a deal that values the athletic-wear company at about $321 million.

Best known for its frozen baked goods, Sara Lee is expanding its non-food operations. It said it will soon begin a tender offer for all outstanding Champion Products shares at $77 each, beating out a $61-a-share bid from Phonicam Inc.

Champion stock climbed $12.125 to close at $75.75 in American Stock Exchange trading Monday.

Rochester, N.Y.-based Champion Products makes athletic, recreational and leisure wear products that are sold to educational institutions, including college bookstores. It reported sales of $219 million in 1988.

A Champion Products official said the company has 4.17 million shares outstanding on a fully diluted basis, which would make the Sara Lee offer worth $321 million.

The purchase would be the latest in a string of small acquisitions by Sara Lee, which has annual sales of more than $10 billion. Last week, it announced plans to buy Hygrade Foods Products Corp., a Southfield, Mich.-based meat processor, for $140 million from Britain’s Hanson PLC.

Owns Hosiery Maker

“Sara Lee is absolutely in an acquisition mode,” said securities analyst Janet Mangano of Josephthal & Co. Mangano said the company’s recent moves were strategically logical because “you can do only so much through product development and by adding new capacity on your own.”

Last year, the company struck a deal to buy hosiery maker Adams-Millis Corp. for about $80 million.

Securities analysts said the Champion acquisition would make sense for Sara Lee by expanding is apparel operations, although they said it would dilute the company’s profits slightly next year.

William Maguire, a securities analyst with Merrill Lynch & Co., said the companies would benefit from the merger because “Sara Lee has a lot of capacity and Champion is capacity-constrained.”

The recent moves are in keeping with Sara Lee’s stated corporate strategy for growth, a spokesman said. He said that once the company’s recent flurry of deals is completed, including the previously announced takeover of Dutch coffee and beverage company Van Nelle Holding NV, Sara Lee’s overall product mix will remain unchanged.

Bid to Expire

“Basically, we’ll remain at 60% food and 40% non-food,” he said.

William Leach of Donaldson, Lufkin & Jenrette Securities Corp. said he believes that the acquisition could dilute Sara Lee’s profits next year by about 5 cents a share. For fiscal 1989, Leach said he expects Sara Lee to earn $3.40 a share and sees net earnings of $3.80 a share in fiscal 1990.

Separately, Phonicam Inc., formed by FS Champ Associates and Walsh Greenwood & Co., said it would allow its $61-a-share, or $254.4-million, offer for Champion Products to expire Monday. “We’re disappointed that we were not successful in our bid,” Phonicam said.

The Sara Lee offer is conditioned on the tender of at least 67% of Champion Products shares outstanding on a fully diluted basis. Champion also said the Feinbloom family and certain related trusts, which own about 27% of Champion, have agreed to tender their stock to Sara Lee.

For the fiscal year ended July 2, 1988, Sara Lee reported earnings of $325 million on sales of $10.42 billion. In the six months ending Dec. 31, it made a profit of $212.8 million on sales of $5.8 billion.