Sysco Corporation and US Foods have announced an agreement to merge their operations, creating a world-class foodservice company. Total value of the transaction is about $8.2 billion, and the board of directors of each company has approved this transaction.
Heading the combined company will be Bill DeLaney, Sysco president and chief executive officer, and the new entity will continue to be named Sysco and headquartered in Houston TX. Upon completion of this merger, Sysco will have estimated annual sales of approximately $65 billion.
Sysco will pay around $3.5 billion for the equity of US Foods, consisting of $3 billion of Sysco common stock and $500 million in cash. As part of the transaction, Sysco will also assume or refinance US Foods’ net debt, which is currently about $4.7 billion, bringing the total value to $8.2 billion. Sysco has secured fully committed bridge financing and expects to issue permanent financing before closing.
After completion of the transaction, equity holders of US Foods will own approximately 87 million shares, or roughly 13% of Sysco. Joining Sysco’s board of directors upon closing will be a representative of each of US Foods’ majority shareholders; affiliates of Clayton, Dubilier & Rice LLC; and Kohlberg Kravis Roberts & Co LP.
“As we continue on our transformational journey at Sysco, this transaction will position us to significantly accelerate our progress in achieving the vision we have for our company: to be our customers’ most valued and trusted business partner,” said DeLaney. “Sysco and US Foods have highly complementary core strengths including a broad product portfolio and passionate food people deeply committed to customer service, quality-assured products, and safety. In particular we look forward to welcoming US Foods’ talented employees and continuing to invest in the development of all of our people. Together we will strive to enhance shareholder value by providing our customers with highly differentiated products and services.”
John Lederer, president and CEO of US Foods, said, “Combining and maximizing the significant strengths of two outstanding companies is certain to be of tremendous advantage in supporting our customers as they tackle the challenges of today’s demanding environment.”
The transaction, which is expected to be completed in the third quarter of 2014, is subject to customary closing conditions and regulatory approvals, including antitrust approval.