The enterprise, which includes businesses in France, Germany, Italy, Spain, the UK and Eastern Europe, is to be sold to an affiliate of private US investment firm Sun Capital Partners for €100 million.
According to the agreement, the buyer will also pay Sara Lee potential contingent sums based on the future performance of the business, starting with 49 per cent of the first €204 million of cash distributed from the business following the close of the transaction.
In addition, the Sun Capital affiliate will assume an estimated amount of approximately €70 million of pension and related liabilities outside of the UK, said Sara Lee in a statement this week.
The transaction, which is expected to be completed by the end of January 2006, forms part of a company overhaul announced in February that will see it sell off businesses that currently account for around 40 per cent of total earnings.
Throughout the 1980s and 1990s Sara Lee diversified widely, resulting in a business portfolio that strayed a long way from its core cake-making activity. As well as clothes and underwear, coffee, cosmetics, toiletries, shoe polish and air freshener products had resulted in operations that many industry experts had said provided no or very little room for all-important synergies.
The transformation, a five-year plan due to continue to 2010, is "designed to dramatically improve the company's performance and better position Sara Lee for long-term growth."
"In just nine months, our ongoing transformation initiatives already have begun to build the momentum needed to drive long-term, profitable growth for Sara Lee," said chief executive officer Brenda Barnes.
Last month the company announced the sale of its US retail coffee business for $82.5m (€68m). In August, it announced the sale of its international cosmetics business, a division that had generated $470m (€387.6m) in sales in 2004.
The company said it intends to use the proceeds generated from its dispositions to fund investment in its growth businesses and strengthen its balance sheet.
Sara Lee this month reported a decline in sales in its first quarter. Unit volume sales were down throughout the company's global bakery divisions, though a moderate low single digit sales growth was recorded in the international bakery segment as a result of retail price hikes.
Earnings for the quarter plunged 81 per cent to $67m, compared to last year's $352m, due in large to the effects of the company's transformation activities.