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.