HOUSTON, TX – Sysco is setting its sights on European expansion with the acquisition of London-based foodservice distributor Brakes Group in a deal valued at approximately $3.1 billion, including $2.3 billion in debt.
The move comes eight months after Sysco’s failed merger with US Foods. A federal judge blocked the transaction after he said that the proposed merger would reduce competition.
Sysco said that this latest acquisition would expand the company’s footprint in the United Kingdom and Ireland and further into Europe, as well as position it for potential further expansion in these markets, according to a press release.
Shares in Sysco fell more than 6% in midday trading on Monday to $42.15. Reuters reports that analysts “questioned the timing of the deal, given the volatility in stock markets, and the price, 12 times Brakes’s adjusted earnings before interest, tax, depreciation, and amortization (EBITDA).”
Brakes Group was originally a poultry supplier when it was first founded in 1958. Over five decades later, it has since grown to provide an extensive range of fresh, refrigerated and frozen foods, as well as non-food products and supplies, to more than 50,000 foodservice customers.
In fiscal 2015, Brakes Group’s revenues increased 6.5% from its previous fiscal year to nearly $5 billion (3.3 billion British pounds).
Brakes Group will operate as a standalone company within Sysco, and its management team and employees will remain in place.
“We have complete confidence that [Brakes Group CEO Ken McKeikan’s] team will achieve its planned business objectives,” said Sysco Chief Executive Bill DeLaney. “We expect to augment this growth by leveraging our combined scale to provide our customers with an even more competitive offering. We look forward to servicing customers across Europe and beyond, with the goal to be their most valued and trusted business partner.”
The combined companies are expected to generate annualized sales of approximately $55 billion. Both companies also expect to complete the transaction before the end of Sysco’s fiscal year in July 2016.
