News

US Foods buys SGA's Food Group for $1.8 billion

July 30, 2018

Illinois-based US Foods said Monday that it's acquiring Arizona-based Services Group of America in a $1.8 billion deal that includes five companies known collectively as SGA's Food Group of Companies. The deal will affect the many thousands of restaurant brands served by both entities, as well as many other food-related businesses. 

SGA's Food Group of Companies alone had combined net sales last year of $3.2 billion in these following companies:

• Food Services of America: Among the nation's largest regional broadline distribution companies serving 16 western and midwestern states from nine distribution centers. 
• Systems Services of America, Inc.: Multi-unit distribution company serving casual, fast casual and QSR brands. 
• Amerifresh, Inc.: Produce sourcing and marketing.
• Ameristar Meats, Inc.: Custom meat products, including 18 different beef programs.
• GAMPAC Express, Inc: Supply chain planning and logistics. 

"This acquisition will significantly increase US Foods' reach across key markets in the attractive and growing northwest region of the U.S. and adds one of the most well-regarded regional distributors to our company," US Foods Chairman and CEO Pietro Satriano said on US Foods' website information regarding the deal. "With a shared commitment to customer service, including a proven track record of leveraging technology and private brands to meet customer needs, SGA's Food Group of Companies is an ideal fit."

The company said strategically the deal provides benefits, including a complementary geographic footprint that expands US Foods' presence in the northwest U.S., as well as the opportunity to increase scale and grow at an  accelerated pace with the addition of SGA's Food Group of Companies 33,000 customers, 12 distribution centers and more than 20 private brands to those already part of US Foods. 

Likewise, US Foods said it expects to reach approximately $55 million in annual run-rate cost synergies by the end of fiscal 2022, primarily driven by savings in distribution, procurement and administrative expenses resulting from the deal while the transaction is expected to become accretive to US Foods' adjust EPS in the second full year, following the closing date which was not provided.

And finally, the purchase price reflects a multiple of 12.5 times SGA's Food Group of Companies 2018E Adjusted EBITDA of $123 million, after accounting for the current approximately $260 million value of cash tax benefits from the acquisition. 

The deal is being paid for largely through term loan financing from J.P. Morgan and Bank of America Merrill Lynch, though the acquisition must meet regulatory approval.