SYSCO Corporation (NYSE:SYY) Surges On Acquisition Plans

Posted by Ryan Mandell December 10, 2013 0 Comment 1382 views

SYSCO Corporation (NYSE:SYY) is a Houston, Texas based food supply company that markets and distributes a range of food and related products including fresh produce, frozen foods, canned and dry foods, beverage products and imported specialties. Yesterday, SYSCO Corporation (NYSE:SYY)’s stock surged 9.65% and closed at $37.62 after making a fresh 52 week high of $43.40 during the session. The 52 week low is of $29.80.

The Acquisition

SYSCO Corporation (NYSE:SYY) yesterday revealed its plan to acquire one of its key rivals, US Foods for about $3.5 billion towards creating a larger, global distribution company. This acquisition is expected to boost SYSCO Corporation’s annual sales by more than 45% to about $65 billion. This is pretty natural as US Foods’ large product portfolio is best fit to complement SYSCO Corporation’s core strengths.

The total deal is valued at $8.2 billion as SYSCO Corporation (NYSE:SYY) will be paying $3.5 billion in cash and stock ($500 million in cash and $3 billion in common stock) while refinancing approximately $4.7 billion in debt. At the completion of the deal, US Foods shareholders will own about 13% of Sysco’s common stock

The Business Strengths

US Foods’ major stakeholders include Clayton, Dubilier & Rice LLC and Kohlberg Kravis Roberts & Co. The company serves well to diverse institutions including government and educational institutions, independent and chain restaurants as well as hospitality companies and healthcare organizations.

SYSCO Corporation (NYSE:SYY) in its recent most fiscal year ended June 2013 served more than 193 locations in the U.S., Canada, Bahamas, Ireland and Northern Ireland; reaching out to  more than 425,000 customers with food and cooking supplies. The annual sales totaled $44.41 billion.

Analyst Recommendation

Analysts at Zacks Equity Research maintains “hold” rating for the stock of SYSCO Corporation (NYSE:SYY) and recommends investors to consider among the peer stocks like United Natural Foods, Inc. (NASDAQ:UNFI), Omega Protein Corporation (NYSE:OME) and Kerry Group PLC (ADR) (OTCMKTS:KRYAY) on which Zacks maintains “buy” ratings.

About Ryan Mandell

Ryan Mandell is our senior staff writer covering the White House for Political Report, Ryan also coordinates with the main newsroom news items and contributing write-ups on cultural, social and political activities. Ryan holds an undergraduate degree in journalism, a Doctorate in international relations and a Master Degree in mass communications with an emphasis in print journalism. Ryan also covered the International Society of Social Defense congress in Spain in 2007 and taken part in the Global Forum on economic policies

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