SYSCO Corporation (NYSE:SYY) Surges On Acquisition Plans
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.
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.
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.