Sysco and US Foods to Merge in $3.5 Billion Deal

Sysco Corporation and US Foods, respectively ranked as North America’s No. 1 and No. 2 food distribution companies, on December 9 announced an agreement to merge. The total value of the transaction is approximately $8.2 billion, and each company’s board of directors has approved the merger.

Bill DeLaney, president and chief executive officer of Sysco, will lead the combined company, which will continue to be named Sysco and remain headquartered in Houston, Texas. At closing, Sysco will have estimated annual sales of approximately $65 billion and general operating cash flow of close to $2 billion.

Sysco will pay approximately $3.5 billion for the equity of Rosemont, Illinois-based US Foods, comprising $3 billion of Sysco common stock and $500 million in cash. As part of the deal, it will also assume or refinance US Foods' net debt, which is currently approximately $4.7 billion.

After completion of the transaction, which is expected during the third quarter of 2014, the equity holders of US Foods will own approximately 87 million shares, or roughly 13% of Sysco. A representative of each of US Foods' majority shareholders, affiliates of Clayton, Dubilier & Rice LLC and Kohlberg Kravis Roberts & Co. L.P., will join Sysco's board of directors upon closing.

"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."

John Lederer, president and chief executive officer of US Foods, commented, "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."

Sysco is the global leader in selling, marketing and distributing food products to restaurants, healthcare and educational institutions, hotels, motels and other establishment that prepare meals away from home. Its extensive product line also includes equipment and supplies for the foodservice and hospitality industries. The company operates 193 distribution facilities serving approximately 425,000 customers. For fiscal year 2013, which ended last June 29 , it generated record sales of more than $44 billion.

US Foods does business with a customer base ranging from independent and multi-unit restaurants to healthcare and hospitality entities, government and educational institutions. With approximately $22 billion in annual revenue, it distributes more than 350,000 products, including exclusive brands such as Chef's Line and Rykoff Sexton. The company employs about 25,000 people at more than 60 locations nationwide.