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Sysco Corp. (NYSE: SYY), Houston, TX, has agreed to acquire US Foods, Rosemont, IL, for about $3.5 billion.
As part of the transaction, Sysco will also assume or refinance US Foods' net debt, which is currently about $4.7 billion.The outstanding equity of US Foods and its net debt, with an enterprise value of $8.2 billion, represents a 9.9x multiple of US Foods' trailing 12-month (as of Sept. 28) adjusted EBITDA of $826 million.
At closing, Sysco will have estimated annual sales of about $65 billion. The equity holders of US Foods will own about 87 million shares, or roughly 13 percent, of Sysco. A representative of each of US Foods' majority shareholders, affiliates of Clayton, Dubilier & Rice LLC and Kohlberg Kravis Roberts & Co. L.P., will join Sysco's board of directors upon closing.
The transaction is expected to generate significant strategic benefits and cost synergies, with annual synergies of $600 million or more after three to four years, primarily stemming from supply chain efficiencies, merchandising activities, and overlapping general and administrative functions.
Bill DeLaney, Sysco president and CEO, said Sysco and US Foods have highly complementary core strengths, including a broad product portfolio and a committed staff. Increased geographic coverage and scale is also expected to enhance flexibility and responsiveness.