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Performance Food Group to buy Reinhart Foodservice

The deal would make PFG one of the largest foodservice distributors in the U.S.
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Performance Food Group (PFG) on Monday said it acquired fellow distributor Reinhart Foodservice in a $2 billion deal that promises to make PFG one of the largest national distributors in the United States.

The deal combines the country’s third- and fifth-largest foodservice distributors. PFG is No. 3 behind Sysco and US Foods, according to data from Restaurant Business sister company Technomic.

Reinhart is No. 5, and the second-largest privately-held distributor in the country. The distributor generates more than $6 billion in net sales, which would give Richmond, Va.-based PFG about $30 billion in net sales, the company said.

“The addition of Reinhart and its complementary strengths will expand Performance Foodservice’s broadline presence, improve our network efficiency and help us achieve our long-term goals,” PFG CEO George Holm said in a conference call Monday discussing the deal, according to a transcript from the financial services site Sentieo.

He said the deal “provides us with greater overall scale, a diverse but similar customer base, including a solid base of independent customers with little overlap.”

Reinhart was established in 1972 and has been owned by Reyes Holdings since 2005, a period in which the distributor grew to $6 billion in sales from $1.6 billion. Holm said that PFG and Reyes have been talking about a transaction “for many years now.”

“Now is the right time for both parties,” Holm said.

Reinhart has 26 distribution centers and 42,500 customers and employs 5,600 people. Its biggest chain customers include Burger King, Subway, and Five Guys. Holm said that PFG also does business with Burger King and Subway in some markets.

The deal is subject to regulatory approvals. PFG said it expects to see about $50 million in “cost synergies” by the third year following completion of the merger. Most of those will come in operations, procurement and logistics.

The agreement also promises to solidify PFG’s status as a major, national distributor and would put it within arm’s reach of US Foods, the second-largest distributor in the U.S., according to the Technomic Power 50 report.

“This really closes the gap between them and the current No. 2 US Foods,” said David Henkes, senior principal with Technomic.

At least some of the reasoning behind the deal centers on independent restaurants. Distributors have focused more attention on this group, which is growing and potentially more lucrative. Reinhart is no exception, but Holm believes that PFG will be able to help the distributor more effectively tap into this group of customers.

“They appropriately have spent a good bit of time redoing their warehouse network, reworking their customer base and positioning themselves for better independent growth,” Holm said. “But it is still a company that continued through that period of time to show, although very modest, independent growth. And we feel that we’ve got some sales processes that can help with that independent growth.”

Holm said the company doesn’t add a “significant amount of geography” with the acquisition, though it has no plans to reduce the number of distribution centers “at this point.” But he said the deal gets PFG “closer to the customer” with better delivery service.

“You’re not running your fleet as many miles,” he said. “Probably not running your salespeople as many miles either. We’ve always found those to be good things in the business.”

Henkes said PFG has made numerous strategic acquisitions recently, including one in which it acquired c-store distributor Eby Brown.

But deals between the largest distributors are rare and, Henkes said, will be increasingly so as the biggest players grow larger.

“This type of acquisition, one that involves two of the top 10 distributors in the industry, is going to be more rare as these distributors become huge national players that are competing coast to coast.”

UPDATE: This story has been updated to include deal analysis.

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