Food distributor giant Sysco announced Monday it will buy rival US Foods for $3.5 billion in cash and stock, creating the largest food and restaurant supplier in the country. The deal, if approved by regulators, would value the transaction at $8.2 billion. Executives said the merger would bring annual sales of about $65 billion, up from about $44 billion currently. Sysco, based in Houston, currently has a network of 193 distribution centers and about 425,000 customers that include hotels, restaurants, schools, hospitals, and other institutions.
Sysco will pay approximately $3.5 billion for the equity of US Foods, comprising $3 billion of Sysco common stock and $500 million of cash. As part of the transaction, Sysco will also assume or refinance US Foods’ net debt, which is currently approximately $4.7 billion, bringing the total enterprise value to $8.2 billion. The merger will give current US Foods equity holders a roughly 13 percent stake in the company. The transaction is expected to close in the third quarter of 2014 and would boost Sysco’s market share in the food and restaurant distribution business from 18 percent to 25 percent, the company said.
The board of directors of both Sysco and the Rosemont, Illinois-based US Foods have approved the deal. Bill DeLaney, Sysco president and CEO, will lead the combined company, which will continue to be named Sysco and headquartered in Houston. “Sysco and US Foods have highly complementary core strengths,” said DeLaney in a statement. “We look forward to welcoming US Foods’ talented employees and continuing to invest in the development of all of our people.”
News of the merger boosted shares of the company by $4.27, or 12.45 percent to $38.58 Monday.
