Sysco signs $8.2bn deal to takeover US Foods

Food distributor Sysco has signed an agreement to take over US Foods in an $8.2bn deal, which would combine both companies’ strengths and customer base.

In the deal, Sysco will pay approximately $3.5bn in cash and stock and will assume US Foods’ debt of $4.7bn.

The company has secured fully committed bridge financing, and expects to issue permanent financing prior to closing.

US Foods’ equity owners KKR and Clayton Dubilier & Rice will receive $500m in cash and a 13% stake in Sysco, while joining its board of directors.

Headquartered in Houston, Texas, the combined entity will be named as Sysco, and is expected to have annual sales of approximately $65bn, with operating cash flows of about $2bn.

It will be led by Sysco president and CEO Bill DeLaney.

After three to four years, the unit will achieve annual synergies of at least $600m, primarily from supply chain efficiencies, merchandising activities and overlapping general and administrative functions.

Subject to customary closing conditions and regulatory approvals, the transaction is expected to close in the third quarter of 2014, and will be immediately accretive to earnings.

Sysco president and CEO Bill DeLaney said, "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.

"Together we will strive to enhance shareholder value by providing our customers with highly differentiated products and services."

The company noted that it will establish a team to prepare for and oversee a comprehensive integration for employees, customers and suppliers.

Goldman Sachs is providing financial advisory services to Sysco.

---