Sysco has spent a year and a half in on-and-off talks to buy the so-called cash-and-carry distributor Jetro Restaurant Depot, despite the risks that come with such a combination.
Sysco, a broadline distributor, will pay a hefty fee if the deal can’t pass regulatory muster. And that regulatory process is still expected to take several more months. It will take on a large amount of debt. Executives get paid to not leave their jobs. And the whole thing could blow up if Sysco raises Restaurant Depot prices.
So why do it? Easy. Restaurant Depot is really profitable. According to a federal securities filing last week, the retailer generated just 19% of the revenue that Sysco did in the nine months ended March 28, Sysco’s 2026 fiscal year. But it generated 81% of the profit.
In that period, Sysco generated $1.2 billion in net earnings on $62.4 billion in revenue, while Restaurant Depot made $983 million in net earnings on $11.7 billion in revenue. The simple fact is, it costs a lot more for Sysco to deliver food directly to restaurants than it does restaurants to get food from Restaurant Depot.
“The transactions would enable Sysco to enter the high-margin, higher-growing and resilient cash-and-carry segment and, together with Jetro Restaurant Depot, create a multi-channel foodservice distribution platform,” Sysco said in a regulatory filing.
Sysco’s management team first broached the prospect of a Restaurant Depot deal in December 2024, and the company approached the retailer early the next year. Talks intensified enough that they signed a confidentiality agreement by July. Talks collapsed in December of that year as the two companies were “unable to agree on the terms of a transaction.” The issues were over company valuations, structure, and governance.
But by this past February the Sysco board told management to restart negotiations and by late March they reached a deal.
Under the deal, Sysco will pay $29 billion to buy Restaurant Depot. It will use mostly debt, some stock and a bit of its own cash to buy the company. Sysco is borrowing $22 billion, including a $3 billion term loan, plus a $19 billion, one-year bridge loan from a selection of lenders, including Bank of America, Goldman Sachs, TD Securities, JPMorgan Chase and Wells Fargo.
The amount of debt is a big deal and has kept investors from fully cheering the acquisition. The company acknowledged the risk of that debt in its filing, saying that the debt could “limit its liquidity and financial flexibility.” A downgrade of its credit rating could also affect the company’s liquidity.
That is not the only risk. Arguably the biggest is the federal government. The U.S. Federal Trade Commission is reviewing the proposal, and has asked for more information, delaying its OK by months. The company does not expect the deal to be closed until early next year.
A lot of groups have pushed back, including the Independent Restaurant Coalition, which has asked the commission to block the merger. Local restaurants are worried about the amount of power Sysco would have on the distribution of food and other goods to restaurants, and about the prospect that the company could raise prices.
Some manufacturers could also be worried about Sysco demanding lower prices from them, too, given that it would dominate both broadline and retail distributing.
Sysco CEO Kevin Hourican has vowed in an interview with Restaurant Business that the company “will absolutely not be raising prices at Restaurant Depot.” And the company has reiterated that in the filing, noting that Restaurant Depot “depends on membership growth and loyalty.”
“Anything that would harm Jetro Restaurant Depot’s relationship with its members and lead to lower membership renewal rates or reduced spending by members in Jetro Restaurant Depot locations could materially adversely affect” Restaurant Depot’s and Sysco’s results. One big way the company would damage membership, according to the filing; failure to remain competitive in pricing” relative to competitors, among other things.
The onus will be on Sysco and Restaurant Depot to convince the FTC that the deal won’t hurt competition. If it can’t, and the deal collapses, then Sysco will have to foot a termination fee of nearly $1.2 billion.
To keep the retailer operating the way it used to, Sysco is paying a lot of money to keep executives and other employees around. Restaurant Depot CEO Richard Kirschner will remain with the company and is receiving equity awards to remain with the company. In addition, employees and other Restaurant Depot executives will receive retention bonuses worth $250 million to stick around.
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