George Weston of Canada Near Pact to Buy Unilever Unit

Canadian food company George Weston Ltd. is close to an agreement to buy Unilever’s U.S. baking business for nearly $1.8 billion in cash, topping bids from Sara Lee Corp. and Mexico’s Grupo Bimbo, people familiar with the situation said Sunday.

George Weston processes foods and controls Loblaw Cos., Canada’s biggest grocer. The purchase would give the company U.S. brands such as Thomas’ English muffins and Entenmann’s cakes. The Unilever division has 19 plants in the U.S. and 12,000 employees and had 1999 sales of $1.7 billion.

Unilever put the business up for sale in October after acquiring it in the $24-billion purchase of Bestfoods. Analysts had pegged Chicago-based Sara Lee as the likely winner over Grupo Bimbo of Mexico, the world’s No. 3 bread maker. Announcement of the sale is scheduled today, the sources said.

George Weston “had been in the running for some time,” said Cynthia Rose-Martel, an analyst with Harris Partners in Toronto. The Unilever business “fits perfectly with the assets they have” in the U.S., she said.

Unilever spokesman Steve Milton and George Weston spokesman Geoff Wilson declined to comment.

Unilever said it was seeking a buyer because the division, called Bestfoods Baking Co. and based in Bayshore, N.Y., didn’t fit with its other businesses. Unilever hired Goldman, Sachs & Co. to manage the sale.

The sale comes as U.S. food makers try to get bigger to compete for shelf space at retailers. The Unilever business was attractive because of its national brands, such as Oroweat, Brownberry and Arnold breads, and its practice of delivering directly to stores, analysts said. That avoids using interim warehouses, reducing costs.

Grupo Bimbo had said it wanted to acquire a U.S. company to add to its operations in California, Texas and Chicago. Sara Lee, the biggest U.S. maker of frozen baked goods, is looking to cut distribution costs and increase sales of food, undergarments and household products.

Sara Lee appeared to have the advantage in the bidding because it had the most cash, analysts had said.

George Weston had sales of about $14 billion in 1999. Its business includes baking and dairy operations and fish processing.

The Toronto-based company holds a 63% stake in Loblaw, which owns more than 1,050 stores across Canada under banners such as Loblaws, Provigo, Zehrs and Real Canadian Superstore. George Weston remade itself in 1998, selling its forestry operations and expanding its supermarket, bread and dairy businesses.

Unilever is about halfway through a program that aims to eliminate 1,200 product names so the Anglo-Dutch company can focus marketing and research spending on its 400 best-known lines, which include Knorr soups and Dove soaps. The plan is expected to reap annual savings of $1.38 billion by 2004.

The company sold 27 businesses last year for about $600 million, including the sale of its European bakery-ingredients unit to Dutch rival CSM. Last month, Unilever agreed to sell several sauce and packet-soup businesses to Campbell Soup Co. for about $1 billion.

Unilever’s U.S. shares have risen 25% in the last year. They rose 83 cents to close at $57.66 in New York Stock Exchange trading Friday.