Houston-based Sysco Corp, the nation's biggest foodservice distributor, announced yesterday that it will acquire its largest competitor, US Foods, for $3.5 billion. The deal has has been approved by the Board of Directors of each company, but is also subject to review by the U.S. Federal Trade Commission.
Bill DeLaney, Sysco president and CEO, will lead the combined company, which will continue to be named Sysco and headquartered in Houston, Texas. A Sysco press release said the company 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.
Deutsche Bank Markets Research group issued a report stating that although Sysco’s share of the food distribution market will climb from 18% to 26% once the deal is completed, the risk is low that the Federal Trade Commission (FTC) will block the merger. However, on a conference call with analysts, Sysco's DeLaney said he anticipates that the FTC will look closely at the deal and could require the company to sell some assets in certain markets, according to the New York Times.