Sysco and U.S. Foods merge

Dec 13, 2013
by WLJ

Food service giants Sysco and U.S. Foods announced a merger last Monday, with Sysco effectively buying up U.S. Foods. The merger would result in a company with an estimated $65 billion in annualized sales, making Sysco one of the single largest players in the American food landscape.

“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,” said John Lederer, President and CEO of U.S. Foods.

Bill DeLaney, Sysco President and CEO who will head the combined company, said, “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.”

“Most numerous and widespread business partner” might have also worked. Reportedly, the merger will entail about 250 distribution centers nationwide and represent close to 28 percent of American food service business.

According to official statements from the company, the merger will balance each company’s strengths and allow for greater geographical coverage, as well as generating “significant strategic benefits and cost synergies.” Among these, the companies claimed “annual synergies of at least $600 million after three to four years” due largely to improved supply chain efficiencies, merchandising and more efficient administration functions.

The value of the transaction stands at $8.2 billion; $3.5 billion for U.S, Foods, and $4.7 billion to assume or refinance U.S. Foods’ net debt. Both companies’ boards of directors have approved the merger.

The question of whether or not the Federal Trade Commission will ultimately allow this merger is still up in the air. Sysco representatives made it clear they did not expect divestitures, but that the possibility wasn’t ruled out either in a conference call on Monday, according to MarketWatch’s Jim Jelter. — WLJ