US foodservice giant buys Brakes Group for £2.2bn

Brakes Group, the UK’s second-biggest foodservice wholesaler, is to be bought by Sysco Corp, the largest US food distributor, from current owner Bain Capital Private Equity in a deal valued at about $3.1bn (£2.2bn) to strengthen Sysco’s presence in Europe.

Analysts, on a conference call, mainly questioned Sysco’s management on the timing of the deal, given the volatility in stock markets, and the price, which was 12 times Brakes’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA).

“This deal was totally consistent with how we have outlined our strategy over time. In terms of why now … when it comes to acquisitions, it is usually the seller that controls the time,” Sysco’s chief executive Bill DeLaney said.

However the high price paid by Sysco represents confidence in the continued growth of the UK foodervice market.

Sysco first bid for Brakes in 2007, but waloked away, leaving Bain to buy it for about $2.8bn. Sysco said on Monday its latest offer for Brakes included the repayment of about $2.3bn of Brakes’ debt.

Brakes, which started as a poultry supplier in 1958, has operations in the UK, Ireland, France, Sweden, Spain, Belgium and Luxembourg.

The combined cBrakes/Sysco ompany is expected to generate annual sales of about $55bn (£39.2bn), Sysco said.

Sysco generated $806.4 million, or just under 2%, of its revenue from outside North America last year. Brakes had revenue of nearly $5bn (£3.6bn) in fiscal year 2015.

Sysco said it expects the deal to close before July, providing it is given the thumbs up by the regulatory authorities.

It is expected that Brakes will operate as a standalone unit, retaining the Brakes brand, and with Ken McMeikan continuing as CEO.


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