Royal Ahold (NYSE: AHO), the international food provider, today announced its wholly owned subsidiary U.S. Foodservice(TM) (USF) has signed a definitive agreement to acquire PYA/Monarch, a major foodservice distributor in the southeast of the United States. PYA/Monarch is currently a subsidiary of Sara Lee Corporation. Combined with USF, Ahold foodservice sales in the US should exceed USD 12 billion in 2001. The total consideration to be paid for the acquisition amounts to USD 1.57 billion. The transaction is subject to customary closing conditions including the need to obtain regulatory approvals. Closing is expected in fourth quarter 2000.
Ahold President & CEO Cees van der Hoeven said the acquisition of PYA/Monarch is ‘fully in line with our international growth strategy and with Ahold’s ambition to become the world’s best multi-channel food provider. Our company continues to grow profitably, organically and through acquisitions in three market channels. First, through its retail store operations — selling directly to the consumer. Second, its foodservice operations — serving the needs of the fast-growing out of home market. Third, in e-commerce. Today’s transaction clearly strengthens the market position of U.S. Foodservice, acquired by Ahold in spring 2000.’
U.S. Foodservice and PYA/Monarch make great combination
The acquisition reunites two companies, U.S. Foodservice and PYA/Monarch and their management teams. The two operated as one company prior to a leveraged buy out of the northern division by the current management team of U.S. Foodservice in 1989. The management teams of both companies are very successful and share a similar business philosophy, fully focused on customer needs. They also use many of the same systems such as IT infrastructures. The similarities will result in cost savings, operational efficiencies and various new services.
Foodservice excellence
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By GlobalDataPYA/Monarch is a large and successful American foodservice distributor. The acquisition expands the geographic reach of U.S. Foodservice throughout the southeast of the US, where PYA/Monarch has centered much of its activity. The company provides over 38,000 food and non-food items, including private label brands, to almost 40,000 customers with sales approaching USD 3 billion. PYA/Monarch operates 15 distribution centers, employing 4,850 staff. The company’s customer base includes national restaurant chains such as Ryans, Applebees and Subway, as well as healthcare institutions, universities and hotels.
Financing details
The total consideration to be paid by U.S. Foodservice for the acquisition amounts to USD 1.57 billion which translates into an EBITDA multiple comparable to what Ahold paid for the acquisition of U.S. Foodservice. For tax purposes, the transaction is structured as an asset transaction which will yield significant tax benefits. The transaction also includes a supply agreement and is expected to close in fourth quarter 2000. It will be immediately accretive to Ahold’s earnings per share. Initially, Ahold will finance the transaction by drawing under a bridge facility. This facility will be refinanced by available cash and proceeds from issuing debt instruments later this year.
Remarks by Bob Tobin, Chairman Ahold USA:
‘We are very pleased with operations at U.S. Foodservice and therefore anxious to increase our involvement in the American foodservice industry. The acquisition is a perfect fit as the cultures of the two companies are similar and their activities complementary. Combining the two companies will result in many cost savings in areas such as sourcing, IT, distribution and knowledge sharing. We anticipate total synergy savings of over USD 30 million in year one, growing to over USD 60 million in year two. This transaction is consistent with our previously announced strategy to be involved in all eating occasions.’
Remarks by Jim Miller, President & CEO U.S. Foodservice:
‘PYA/Monarch and U.S. Foodservice worked together in the same family many years ago. We have great respect for each other. PYA/Monarch’s culture and operating practices blend easily with ours, providing every means for a successful merger. This reunion provides us with an opportunity to better service our close to 200,000 institutional customers, broaden our marketing reach, attract new business and capitalize on the rich heritage and dedicated work force that PYA/Monarch brings.’
Ahold in the United States
Ahold has been active in the US since 1977 and currently owns five large and successful food retail operating companies along the eastern seaboard: Stop & Shop, Giant of Landover, Giant of Carlisle, BI-LO and Tops. The combined U.S. store count is 1,100 with annualized sales, including U.S. Foodservice, approaching USD 30 billion. Early in 2000, Ahold acquired U.S. Foodservice, one of the largest U.S. foodservice distributors with 40 distribution and marketing centers across the country and annualized sales of USD 8 billion. Ahold also enjoys a partnership with America’s leading internet e-grocer, Peapod.
U.S. Foodservice
U.S. Foodservice is one of the largest foodservice distributors in the United States. The company distributes food and related products to restaurants and institutional foodservice establishments across the continental United States. U.S. Foodservice markets and distributes more than 43,000 national, private label and signature brand items to over 143,000 foodservice customers, including restaurants, hotels, healthcare facilities, cafeterias and schools. The company, acquired by Ahold in Spring 2000, employs more than 14,000 foodservice professionals. U.S. Foodservice’s diverse customer base encompasses independent and chain businesses, including Ruby Tuesday and Pizzeria Uno.
Royal Ahold
Royal Ahold operates approximately 7,000 supermarkets, hypermarkets and other store formats in the United States, Europe, Latin America and Asia with annualized sales approaching USD 50 billion. The company serves the food needs of 30 million weekly customers in 23 countries. Ahold is also a significant player in the foodservice industry and rapidly growing its e-commerce activities. Many Ahold operating companies have on-line services for customers. Ahold employs worldwide over 350,000 associates.
Ahold shares are listed in Amsterdam (Ahold) and as ADRs on the New York Stock Exchange (AHO). Ahold shares are also listed in Zurich, Switzerland. Ahold’s website can be found at http://www.ahold.com.
Royal Ahold press releases may contain ‘forward-looking’ statements. Actual results may differ from such statements as they may have been influenced by factors beyond the company’s ability to control.
