Looks like Sysco will keep its title as the country’s largest foodservice distributor for a while longer.
US Foods and Performance Food Group (PFG) on Monday said they have mutually decided to end merger talks, with both companies saying they came to that conclusion after a review of the benefits of a combination along with regulatory concerns.
“Following a comprehensive evaluation of regulatory considerations and synergies related to a potential business combination with US Foods, with the assistance of our independent financial and legal advisors, we have decided to terminate discussions,” PFG CEO George Holm said in a statement.
“While we are pleased to have engaged in this exploratory process together, our board of directors and executive leadership team have determined that it is in the best interest of US Foods and its shareholders to terminate discussions regarding a potential combination,” Dave Flitman, CEO of US Foods, said in a separate statement.
The combination of PFG and US Foods, the country’s second and third largest distributors by revenue, would have overtaken Sysco to create the largest broadliner in the country. That would have had major implications for the restaurant industry, particularly the independent restaurants that source much of their products from one of those companies.
But regulatory concerns were always a major question mark. A decade ago, the federal government blocked a planned Sysco-US Foods merger.
While the political environment might seemingly be more friendly toward such combinations, concerns about menu prices at restaurants and other foodservice providers might have made a US Foods-PFG combination untenable.
Instead, both companies believe they’ll be fine on their own. US Foods announced plans to buy back $250 million worth of shares. “From the very beginning of this process, we have been clear about our ability to deliver on our growth algorithm as a standalone company,” Flitman said.
PFG, meanwhile, reaffirmed sales and profit targets for the current quarter, with sales expected to be $16.4 billion to $16.7 billion and adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, of $450 million to $470 million. The company also affirmed full-year financial targets.
“Our board of directors is unanimous in its belief that the clearest and best path to long-term stockholder values is executing our standalone strategic plan, leveraging our diverse business segments to drive consistent revenue and profit growth,” Holm said.
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