Dive Brief:
- Sysco is ready to close its $8.2 billion takeover of rival US Foods, but is being forced to sell off roughly $5 billion of its prize in order to satisfy regulators, according to the New York Post.
- The Performance Food Group, a smaller rival controlled by the Blackstone Group private equity firm, would buy the assets and transform into a new, national rival to the newly merged Sysco-US Foods.
- Such a divestiture is far greater than what Sysco anticipated when it announced the takeover in December 2013. At that time the foodservice company said it would sell $2 billion in assets in order to satisfy regulators.
Dive Insight:
The folks at Sysco must be feeling more than a little cynical these days. After crafting a more than $8 billion deal (which includes assuming some $4.7 billion in debt) and saying it would then sell $2 billion in assets as a way to keep federal regulators out of its business, those regulators apparently decided that the deal was still too big. And they are now forcing sales of assets that account for roughly one-quarter of Sysco's revenue. Given that high of a price, a year of disruption, and the uncertainty created by the arrival of a new national competitor to replace the one Sysco is buying, you have to wonder if the US Foods deal was worth the trouble.
And any folks at Sysco who aren't yet feeling cynical only have to ponder the following to change their minds: the big winner in this deal isn't Gordon Food Service or any of the other companies who had reason to worry about a Sysco-US Foods combination. The winner is clearly the Blackstone Group, which sees its Performance Food Group move into the big leagues at fire-sale prices.