Farmer Bros. to acquire Sara Lee D.S.D. coffee

by Eric Schroeder
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TORRANCE, CALIF. — Farmer Bros. Co., an institutional coffee roaster, has reached agreement to acquire the U.S. direct-store delivery food service coffee business of Downers Grove, Ill.-based Sara Lee Corp. for $45 million. The acquisition, which would give Farmer Bros. access to more than 20,000 additional customers, would nearly double Farmer Bros. sales and make the company the nation’s largest D.S.D. business for coffee and allied products.

"This acquisition will allow us to quickly achieve our long-term goals of coast-to-coast market penetration, cost reductions and margin improvements as a result of economies of scale, and improved returns on our invested capital," said Rocky Laverty, chief executive officer of Farmer Bros.

As part of the acquisition, which is expected to close in the first quarter of 2009, Farmer Bros. would acquire the Superior Coffee, Cain’s, Ireland, Justin Lloyd, McGarvey, Metropolitan, Prebica, Suntipt (U.S. only), Wechsler, Café Royal and Royal Kona brands. In addition, Farmer Bros. and Sara Lee have entered reciprocal co-pack arrangements for the supply of certain coffee and tea products.

Farmer Bros. said the acquisition should contribute incremental positive cash flow within 6 to 12 months after the closing.

For Sara Lee, the sale marks another step in the company’s commitment to simplify its business.

"We remain committed to growing our Foodservice beverage business, with its leading liquid and roast and ground coffee positions, through our strong national sales force and distributor network," said C.J. Fraleigh, chief operating officer, North America, Sara Lee Corp.

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