Sysco to Buy US Foods for $3.5 Billion

Sysco to Buy US Foods for $3.5 Billion

Sysco agreed on Monday to buy US Foods for about $3.5 billion in stock and cash, uniting two of the biggest food distributors in the country.

Under the terms of the deal, Sysco will pay $3 billion in stock and $500 million in cash. The transaction will give US Foods’ current owners, the investment firms Clayton, Dubilier & Rice and Kohlberg Kravis Roberts, a stake of roughly 13 percent in the combined company.

Including the assumption of US Foods’ debt, the transaction is valued at $8.2 billion.

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By buying one of its largest rivals, Sysco will solidify its position as the reigning giant of food distribution. The company, whose trucks move millions of pounds of frozen food and kitchen supplies around the country, expects its annual revenue to grow by 46 percent, to $65 billion.

The deal will also give US Foods’ owners a path to exit their investment. Clayton Dubilier and K.K.R.bought the company from the Dutch grocery store company Royal Ahold in 2007 for about $7.1 billion, which included debt.

The company continued to increase its sales after its leveraged buyout, reporting $21.7 billion in revenue last year.

Sysco expects to achieve about $600 million in cost savings from the transaction about three to four years after closing, including by cutting duplicative merchandising and back-end office systems.

“Sysco and US 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,” Bill DeLaney, Sysco’s chief executive, said in a statement.

The transaction is expected to close by the third quarter next year, pending antitrust approval.

Sysco was advised by Goldman Sachs and the law firms Wachtell, Lipton, Rosen & Katz and Arnall, Golden & Gregory. US Foods was counseled by Simpson Thacher & Bartlett and Debevoise & Plimpton.