A major consolidation in the food service industry, following word on Monday that Sysco Corp. SYY would purchase rival US Foods.
According to a press statement, Sysco will pay around $3.5 billion in cash and stock for US Foods, and will assume about $4.7 billion of US Foods' debt.
The combined company, to be named Sysco and headquartered in Houston, Texas, is expected to have estimated annual sales of around $65 billion.
Once the transaction is completed, the equity holders of Rosemont, Illinois-based US Foods – affiliates of the private equity investment firm Clayton, Dubilier & Rice and Kohlberg Kravis Roberts KKR – will join Sysco's board of directors.
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“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,” Sysco president and CEO Bill DeLaney said in a press statement.
“In particular we look forward to welcoming US Foods' talented employees and continuing to invest in the development of all of our people,” he added. “Together we will strive to enhance shareholder value by providing our customers with highly differentiated products and services."
Sysco sells, markets and distributes food products to schools, hotels, restaurants, hospitals and other facilities – serving about 425,000 customers. For the fiscal year ending in June, the company says it generated record sales of over $44 billion.
US Foods also offers food service distribution to institutions, with over 350,000 products and its own national brands; generating around $22 billion in annual revenue,
The transaction, subject to closing conditions and anti-trust approval, is expected close in the third quarter of 2014.
Sysco stocks initially rose 23 percent on the news.
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