US Foods to acquire SGA’s Food Group of Companies

US Foods Holding Corporation and Services Group of America have entered into a definitive agreement under which US Foods will acquire five operating companies collectively known as SGA’s Food Group of Companies, for $1.8 billion in cash. The transaction has been unanimously approved by US Foods’ board of directors.

Scottsdale AZ-based SGA’s Food Group of Companies has combined 2017 net sales of $3.2 billion and about 3,400 employees. It currently operates as these five separate operating companies:

•Food Services of America Inc (FSA)—One of the largest regional broadline distribution companies in the United States serving 16 states in the West and Midwest from nine distribution centers; 75% of net sales.

•Systems Services of America Inc (SSA)—Multi-unit distribution foodservice company specializing in distribution to casual and fast casual dining establishments and regional and national QSR chains; 21% of net sales.

•Amerifresh Inc—Strong produce sourcing and marketing capabilities, 2% of net sales.

•Ameristar Meats Inc—Provider of custom meat products, including 18 different beef programs to meet customer specifications; 1% of net sales.

•GAMPAC Express Inc—Supply chain planning and logistics; 1% of net sales.

US Foods will finance the acquisition primarily with $1.5 billion in fully committed term loan financing from J P Morgan and Bank of America Merrill Lynch and will fund the balance of the purchase price through its liquidity resources. At the closing of the acquisition, US Foods’ pro forma net leverage is expected to be 4.1x. Given the combined company’s strong cash flow generation, including synergies, US Foods expects to reduce net leverage to approximately 3.0x by the end of fiscal 2020.

The acquisition is subject to regulatory approval and other customary closing conditions.

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