Food supplier Sysco Corp. (NYSE: SYY) is changing course in looking for acquisitions since the $8.2 billion merger with rival US Foods Inc. fell apart.
The deal with privately-held US foods was announced in December 2013, originally consisted of Houston-based Sysco paying $3 billion in stock, $500 million in cash and assuming Rosemont, Illinois-based US Foods’ $4.7 billion of debt. However, the deal has received regulatory scrutiny ever since it was made public.
Earlier in 2015, the U.S. District Court in the District of Columbia granted the Federal Trade Commission a request to block the Sysco-US Foods merger. The FTC claimed if the merger went through, then the two companies would have had a dominant market share in the food distribution industry. Sysco considered appealing the ruling, but decided in June to call off the merger instead.
Meanwhile, Sysco already began making smaller acquisitions. In May, the company bought Ottawa, Ontario-based food distributor Tannis Trading Inc. for undisclosed terms. Tannis has about $118 million in annual revenue. In September, Sysco subsidiary Guest Supply acquired Gilchrist & Soames, a Plainfield, Indiana-based supplier of soaps, body lotions and shampoos to hotels and spas, from Swander Pace for undisclosed terms. Guest Supply provides personal care and bath products along with room accessories, such as ice buckets, to hotels.
Sysco will remain open to making deals in both the company’s core and noncore portfolio. “Acquisitions remain important in our world,” mentioned Sysco CFO Joel Grade in a recent investor call. “You can expect us to continue to pursue acquisitions in our core portfolio as well as remaining open to other strategic opportunities.” Grade was recently promoted to CFO on Sept. 1 from chief accounting officer. He replaced Chris Kreidler, who resigned in order to pursue other opportunities.