U.S. food giants US Foods and Performance Food Group announce data-sharing agreement, marking the initial move in a potential major merger
In a significant development for the broadline food distribution industry, US Foods and Performance Food Group (PFG) have agreed to share confidential information, potentially leading to a merger.
The two companies, each a major player in their respective sectors, have been discussing a potential business combination. US Foods primarily distributes to restaurants, healthcare facilities, and schools, while PFG caters to convenience stores, grocery stores, and vending machines.
If the merger were to occur, it would create the largest broadline food distributor in the United States. In 2024, Sysco, the current leader in this market, generated $64.6 billion in total sales, according to Technomic. PFG, on the other hand, generated $60 billion in sales in the previous year, while US Foods had $37.9 billion. Sysco is reportedly valued at $38.19 billion.
The potential combination of the two companies could result in meaningful economies of scale, expanded growth opportunities, complementary geographic reach, operational efficiencies, and a differentiated go-to-market offering. Customers of the combined company would benefit from a broader product offering and enhanced ability to compete in the marketplace.
The discussions between US Foods and PFG were initiated in August, when US Foods approached PFG to discuss an acquisition. However, PFG initially declined the invitation. Sachem Head, an activist investment group, has been encouraging PFG to explore a potential combination with US Foods, and, absent a transaction, to consider ways to further improve margins.
Early this month, Performance Food Group disclosed that it had received a nomination notice for four director candidates from Sachem Head. The nominees include a couple of former US Foods board members.
Heather Lalley, the managing editor of Restaurant Business, Foodservice Director, and CSP Daily news, reported that US Foods is pleased with PFG's decision to explore the regulatory considerations and synergies of a potential combination. According to US Foods CEO David Flitman, a combination with PFG has the potential to create significant value for both companies and their stakeholders.
In a move that further strengthens the case for a merger, PFG acquired Core-Mark, one of the largest wholesale distributors in convenience retailing, in 2021. This acquisition expanded PFG's reach and product offerings, making it an even more attractive partner for US Foods.
No assurance has been given that this information sharing will result in a transaction proposal or any certain outcome or timing. However, the potential benefits of a merger are clear, and both companies stand to gain significantly from a successful combination.
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