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US Foods to acquire Smart Foodservice Warehouse Stores for $970M

Transaction boosts broadliner’s positioning in the $17B cash-and-carry market

US foods Holding Corporation announced it will acquire Smart Foodservice Warehouse Stores from affiliates of Apollo Global Management for $970M in cash. Rosemont, Ill-based US Foods, a broadline foodservice distributor, entered into a definitive agreement for the cash-and-carry distributor. Smart Foodservice operates 70 such small stores in California, Washington, Oregon, Idaho, Nevada, Utah, and Montana, serving small and mid-sized restaurants and foodservice businesses.

Smart Foodservice was founded in 1955 and now employees 900 associates, with $1.1B in revenues and about $85M in adjusted EBItDA. Pietro Satriano, US Foods chairman and chief executive, said that Smart Foodservice will help US Foods bolster its cash-and-carry line of businesses, and accelerate its growth.

For US Foods, the acquisition is an attractive one in the trending cash-and-carry foodservice channel, with a market size of $17B and growing at a 4 percent to 5 percent clip. According to the announcement, “US Foods sees higher case volume growth with customers who place delivered orders and purchase through existing CHEF’STORE cash and carry locations. Smart Foodservice is a proven model that provides significant expansion opportunities.”

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US Foods projects $20 million in annual run-rate cost synergies by 2024 and the transaction will be immediately accretive to adjusted diluted EPS. The transaction doesn’t include the Smart & Final retail grocery business, which was spun off prior to executing the definitive agreement. US Foods will tap $700 million in financing from Citigroup and use its liquidity for the balance of the funds needed for the transaction.

[Related article: PFG finalizes acquisition of Reinhart Foodservice from Reyes Holdings]

This acquisition cuts the revenue spread between US Foods and Performance Food Group, the #2 broadline distributor and its closest rival. With the purchase of Reinhart Foodservice finalized late last year, PFG surpassed US Foods with total annual revenues in the $30B range. Assuming few store closures, Smart Foodservice Warehouse Stores will add more than $1B in revenues to US Foods’ top line over the next four quarters.

Photo credit: US Foods, Smart Foodservice (featured)

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