Sara Lee officials quit JP board Move signals rift between 2 companies

June 29, 1996|By Sean Somerville | Sean Somerville,SUN STAFF

In a signal of a widening rift between Columbia-based JP Foodservice Inc. and former parent company Sara Lee Corp., the companies said yesterday that three Sara Lee Corp. representatives had resigned from JP Foodservice's board.

Sara Lee is entitled to the board seats because it holds 32 percent of JP Foodservice's stock.

In February, the board's five other members vetoed a Sara Lee plan for JP Foodservice to take over Sara Lee's supply business, PYA/Monarch Inc.

Sara Lee Executive Vice President C. Steven McMillan attributed the resignations to the failure of the deal.

"In view of Sara Lee's active continuing involvement in the food service industry through its subsidiary PYA Monarch Inc., we determined that our continued service on the JP Foodservice board might raise the possibility of a conflict of interest," he said in a statement.

Jim Miller, chairman of JP Foodservice's board, said in a statement, "We are grateful for the service and contribution of the Sara Lee representatives over the years."

Neither JP Foodservice nor Sara Lee returned calls yesterday seeking comment.

JP Foodservice stock closed at $25, up $1. Sara Lee closed at $32.375, up 37.5 cents.

JP Foodservice was created when a management team led by Miller executed a leveraged buyout of what had been part of Sara Lee's food service operation in 1989.

The companies retained close ties, with Sara Lee acting as a major supplier of meat and baked goods to JP Foodservice.

In their statements, the JP Foodservice and Sara Lee executives said that relationship would continue.

The local company supplies food to major restaurant chains such as Ruby Tuesday's and Subway, as well as to Oriole Park at Camden Yards.

With $1.1 billion in annual sales, JP Foodservice is the nation's sixth largest food distributor.

It also is a major player in mid-Atlantic and Northeastern markets.

PYA/Monarch, the nation's No. 3 "broadline" food service company, is big in the South and the Midwest.

Sara Lee last November proposed exchanging its PYA/Monarch food business for 52.4 million shares of newly issued JP Foodservice common stock, worth about $1 billion at the time.

Although framed as a sale, the deal would have made Sara Lee an 84 percent shareholder of JP Foodservice.

To keep a takeover from happening without consent, JP Foodservice approved a "poison pill" plan that would have been activated if Sara Lee had moved to buy more shares.

Five board members -- three independent directors and two JP Foodservice executives -- decided the deal would cut earnings per share and give control to Sara Lee for too cheap a price.

When JP Foodservice Inc. announced earnings in April, it said that sales had grown four times faster than the company had predicted upon going public in 1994.

Pub Date: 6/29/96

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