Sysco-US Foods Deal Faces Review, Customer Concerns - Modern Distribution Management

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Sysco-US Foods Deal Faces Review, Customer Concerns

But foodservice distributor moves forward on integration plans.
Scott-84x84
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Foodservice distributor Sysco is pushing forward on integration plans for its planned $8.2 billion acquisition of US Foods despite the pending antitrust review of the proposed acquisition by the Federal Trade Commission.

In its fiscal second quarter 2014 earnings call, Sysco announced it has formed a committee of senior executives from both Sysco and US Foods. The group, chaired by Bill DeLaney III, president and CEO of Sysco, will oversee the integration planning and approve key decisions of the acquisition. The group's three main goals are: day one readiness, value creation and long-term organizational design.

Chris Kreidler, CFO of Sysco, has been appointed to lead the integration planning.

To facilitate a smooth acquisition, the committee has established four integration "tracks": sales, merchandising, operations and corporate. Greg Bertrand, senior vice president of foodservice operations for Sysco, will lead the sales, merchandising and operations integration. David Schreibman, executive vice president of strategy for US Foods, will lead the corporate integration.

But while Sysco is moving forward on the deal, some customers still have concerns, including Isaac Raaen, owner of the Bear's Den in Byron, MN, who said in an interview with KAAL news that he is concerned prices will go up after the acquisition due to less competition. "We just want to make sure we're getting the best quality product at the best available price," Raaen said in the interview.

The restaurant, which currently uses Sysco and US Foods, said they would seek out a smaller secondary supplier to maintain price competitiveness.

While some customers may still hold concerns, DeLaney says customer response to the acquisition has been largely positive. "I would say many are excited to understand what the benefits are; and I would say largely customers are pretty open-minded, and they are looking for those benefits. Obviously, there are some people out there that don't like this, they tend to be more on the competitive side of the ball, and they are having those types of conversations, and we are addressing that as appropriate," he said during the call.

Sysco said that one of its biggest goals is to have open, effective communication with its customers through the acquisition process. "We are in constant contact with our customers," said DeLaney. "We have equipped our operating company presidents and their sales leadership with pieces to communicate with the local chefs associations and restaurant associations."

Sysco expects the acquisition to generate $600 million in synergies over three to four years.

Sysco will assume or refinance all of US Foods’ net debt, a value of about $4.7 billion. A bridge loan was secured in December that would help Sysco finance the acquisition. Other financing is also being explored, but Sysco is waiting for regulatory approval of the acquisition before definitively securing any more options.

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