December 29, 2013

Sysco to purchase one of its biggest rivalsThe food industry was shaken up recently when two restaurant supply giants – Sysco and US Foods – announced they would be merging into one company. Sysco will pay more than $8 billion to acquire its rival, and the company expects the deal to raise its annual sales by 46 percent, to approximately $65 billion a year, according to The Associated Press.

Sysco, based in Houston, is the largest seller, manufacturer and distributor of food products in the world. With this new deal, which will be completed in the third quarter of 2014, the new entity will play an even more dominant role in the food service industry.

Details of the deal
Sysco will pay for the acquisition with $3 billion in common stock and $500 million in cash, while taking on or refinancing about $4.75 billion of debt that is currently owed by US Foods. US Foods shareholders will own about 13 percent of Sysco once the deal is complete.

“Sysco and US Foods have highly complementary core strengths including a broad product portfolio and passionate food people deeply committed to customer service, quality-assured products and safety,” Bill DeLaney, Sysco president and chief executive officer, said in a statement. “In particular we look forward to welcoming US Foods’ talented employees and continuing to invest in the development of all of our people.”

Impact on the food industry
If you’ve taken culinary courses and work in the kitchen of a restaurant, health care, educational or lodging establishment, this new deal will likely have important effects on your workplace. With this deal, Sysco will become the largest player in the food supply business by far. By integrating the US Foods portfolio into its already impressive range of products and services, the company should be able to offer its customers an even better, more well-rounded experience.

However, whenever one company takes on such a dominant role in one industry, there are always concerns about how it will affect competition and service in that industry. Restaurant owners and chefs who handle ordering and supplies will have to keep a close eye on any possible changes that result from this deal, which could range from price fluctuations to a revamping of delivery procedures.

This merger could also have an effect on the sustainable food movement, as this new, larger version of Sysco should be more easily able to provide more environmentally conscious services and products. And if that doesn’t happen, the deal could push more forward-thinking chefs and restaurateurs toward local sourcing options.