1 of 2. An US Foods Chef’s Store is seen in an undated publicity photo. Sysco Corp said it would buy rival US Foods Inc for about $ 3.5 billion and assume about $ 4.7 billion in debt to cement its position as the biggest U.S. food distributor, driving up Sysco’s shares 30 percent before the bell.
Credit: Reuters/Handout via US Foods
(Reuters) – Sysco Corp (SYY.N) will buy US Foods Inc for about $ 3.5 billion from its private equity owners in a deal that will combine the top two U.S. food distributors and create a company commanding about a quarter of the $ 235 billion North American market.
Sysco, whose shares jumped about 25 percent to a record high in early trading, will also assume US Foods’ debt of about $ 4.7 billion as it combines its supply chain expertise with the strong consumer-facing technologies of US Foods.
Shareholders of US Foods, owned by affiliates of private equity firms Clayton, Dubilier & Rice and KKR & Co (KKR.N), will own about 13 percent of Sysco after the closing of the deal, which creates a company with revenue of $ 65 billion.
“Combining and maximizing the significant strengths of two outstanding companies is certain to be of tremendous advantage in supporting our customers,” US Foods Chief Executive John Lederer said in a statement on Monday.
Sysco Chief Executive Bill DeLaney, speaking on a conference call with analysts, said Sysco now has an 18 percent share of the market, while US Foods has 9 percent.
DeLaney said the Federal Trade Commission, which rules on antitrust matters, would certainly scrutinize the deal but he noted that there were about 15,000 private companies involved in the U.S. food distribution industry.
Sysco and US Foods distribute foods to restaurants, hotels, hospitals, schools and other institutions.
DeLaney said Sysco was attracted by US Foods’ customer-facing technologies, such as standardized ordering software and mobile apps. “We are particularly strong in the supply chain side of things,” DeLaney said.
Clayton, Dubilier & Rice and KKR acquired the former U.S. Foodservice from Dutch grocer Ahold (AHLN.AS) for $ 7.1 billion in 2007.
Sysco said the deal would add to earnings immediately after closing, probably in the third quarter of 2014.
Goldman Sachs & Co is financial adviser to Sysco, while Wachtell, Lipton, Rosen & Katz and Arnall, Golden & Gregory LLP are legal advisers.
Simpson Thacher & Bartlett LLP and Debevoise & Plimpton LLP are legal advisers to US Foods, which did not identify a financial adviser.
Sysco shares were up 12 percent at $ 38.31 in late morning trading on the New York Stock Exchange.
(Additional reporting by Maria Ajit Thomas; Editing by Kirti Pandey and Ted Kerr)
Reprinted with permission from the source
Sysco to buy US Foods from private equity, shares leap
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