Core-Mark (CORE) - Get Core-Mark Holding Company Inc. Report shares rose Tuesday after the food distributor agreed to be acquired by fellow grocery distributor Performance Food Group (PFGC) - Get Performance Food Group Company Report for $2.5 billion, including debt.
Core-Mark shareholders will receive $23.875 per share in cash and 0.44 shares of Performance Food Group for each Core-Mark share they own.
Core-Mark shareholders will own 13% of the combined company. Core-Mark expects to continue paying its current dividend through the completion of the transaction.
Core-Mark recently traded at $45, up 6.7%, while PFG was falling 3.2% to $50.08.
Core-Mark has 7,500 employees and operates 32 distribution centers in the U.S. and Canada. It has 40,000 customer locations.
The deal “accelerates PFG’s diversification and adds highly complementary assets in the convenience store channel,” the companies said. “With the closing of this transaction, PFG will add approximately $17 billion of net sales, resulting in total PFG pro-forma last-12-month net sales of approximately $44 billion.”
The transaction is expected to be accretive to adjusted EPS in the first full fiscal year following the close. And annual cost savings of about $40 million are expected by the third full year after closing.
PFG expects to fund the transaction with borrowing from its asset-based revolving credit facility and the issuance of new senior unsecured notes.
At least one current Core-Mark director will be added to the PFG Board of Directors.
In other food industry news, Tyson Foods TSN last week posted stronger-than-expected second-quarter earnings, but cautioned that it faces "substantial" inflation pressures
It also agreed to sell its pet-treat business to General Mills for $1.2 billion in cash.