Sysco is getting into the cash-and-carry business.
The giant broadline distributor, the country’s largest provider of food and other goods to restaurants and other foodservice providers, on Monday said that it has a deal to acquire Jetro Restaurant Depot for $29.1 billion in cash and stock.
Restaurant Depot is a leading source of products for mostly independent restaurants and other businesses. It operates 166 large-format warehouse stores in 35 states that generate $16 billion in annual revenue, including $2.1 billion in EBITDA, or earnings before interest, taxes, depreciation and amortization.
Restaurant Depot shareholders will receive $21.6 billion in cash in the deal and 91.5 million shares of Sysco stock. The total value of the deal represents a multiple of 14.6 times Restaurant Depot’s operating income.
The deal gives Sysco access to a crucial customer base of independent restaurants. Restaurant Depot serves about 725,000 such operators every year.
“The acquisition creates a powerful multichannel foodservice platform, strengthens our financial profile, unlocks synergy while delivering more value, choice and convenience to customers nationwide,” Sysco CEO Kevin Hourican told investors on a conference call Monday morning. He called Restaurant Depot “a gem of a company.”
Hourican said that Sysco plans to continue opening new Restaurant Depot warehouses around the country. Sysco will be able to leverage its size and scale to open more than 125 new Restaurant Depot locations across the country.
The combined company last year generated nearly $100 billion in revenue and $6.4 billion in adjusted EBITDA.
But the combined companies are projecting $250 million in annual cost “synergies” within the first three years, representing 12.5% of Restaurant Depot’s operating income. Those savings will come in procurement and supply chain optimization.
Sysco plans to fund the cash in the deal with $21 billion in new debt and $1 billion in cash on hand. Once the deal is complete, Restaurant Depot shareholders will own about 16% of Sysco stock.
Stanley Fleishman, executive chairman of Jetro Restaurant Depot, said the deal is a “clear recognition of the strength of our business model.”
He cited Sysco’s national and international supply logistics capabilities, which will help the retailer expand into new markets.
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