Blog: Mega deal set to shake up US foodservice distribution

Dean Best | 10 December 2013

Off our beat but food manufacturers serving the US foodservice sector should note the proposed takeover of US Foods by rival Sysco.

The companies are the two largest foodservice distributors in the US and Sysco said the deal, if approved, will create a business generating annual sales of around US$65bn.

The takeover, if backed by anti-trust regulators (and that, according to some, could be a challenge), will see Sysco pay US private-equity firms KKR and Clayton, Dubilier & Rice a mix of cash and stock for US Foods.

The private-equity firms paid Dutch grocery retail giant Ahold $7.1bn for US Foods in 2007.

Sysco's largest customers include quick service restaurant chains like McDonald's and Wendy's but it has around 425,000 clients across the US.

Both Sysco and US Foods serve a wide range of customers, including restaurants and hotels but also healthcare and educational establishments.

The combined entity is expected to account for around 25% of sales in the national US foodservice sector, potentially presenting Sysco with greater purchasing power when dealing with its suppliers.

Industry watchers are split on whether US regulators will ask Sysco to offload some assets to get the deal through but, even if the company has to sell some bits of its business, the transaction looks set to create a powerful operator in the channel.