NEW YORK (The Deal) -- Sysco (SYY - Get Report) said Monday it would acquire private equity-backed U.S. Foods Inc. in an $8.2 billion cash, stock and assumed-debt deal that would unite two of the nation's largest food distributors.
Terms of the deal call for Houston-based Sysco to pay $3 billion in common stock and $500 million in cash for U.S. Foods and to assume or refinance $4.7 billion of net debt.
Post-deal, U.S. Foods owners Clayton, Dubilier & Rice LLC and Kohlberg Kravis Roberts & Co. LP would own about 13% of Sysco, and each private equity firm will appoint a representative to the buyer's board.
The deal values U.S. Foods at 9.9 times the company's $826 million in trailing 12-month adjusted Ebitda, with Sysco estimating it can extract at least $600 million in annual synergies from the deal.
Sysco CEO Bill DeLaney, who will continue to lead the combined company, in a statement said the purchase would create a food distribution giant. Sysco runs 193 distribution facilities serving 425,000 customers and generates about $44 billion in annual sales. U.S. Foods has about $22 billion in annual sales, with 60 locations nationwide.
"Sysco and U.S. 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," DeLaney said. "Together we will strive to enhance shareholder value by providing our customers with highly differentiated products and services."
Shares of Sysco increased 27%, almost $10 apiece, in premarket trading following the announcement.
U.S. Food, formerly U.S. Foodservice, was a rollup that can trace its roots back to 1853. The company was acquired by Royal Ahold NV in 2000 for $3.6 billion, and flipped to private equity in 2007 for $7.1 billion in cash and debt. The two New York private equity firms invested a combined
$2 billion to $2.5 billion equity in the unit, according to previous reports from The Deal Pipeline, with the rest of the price comprised of debt.
Simpson Thacher & Bartlett LLP and Debevoise & Plimpton LLP are serving as U.S. Foods' legal advisers. Marni Lerner is leading the Simpson team. The Debevoise team includes Paul S. Bird, David A. Brittenham and Steven J. Slutzky.
By Lou Whiteman