Credit: Sysco Corp.SYY recently completed the $3.1 billion acquisition of London-based Brakes Group, announced in Feb 2016. The acquisition was financed with new debt that Sysco issued in both U.S. dollars and euro, and will expand the global food product maker's footprint in Europe.
Brakes Group is a leading foodservice distributor in major European countries, namely, the U.K., Ireland, France, Sweden, Spain, Belgium and Luxembourg. In fiscal 2015, Brakes Group generated revenues of nearly $5 billion, up 6.5% year over year. It supplies almost 50,000 products including 4,000 own-brand items to roughly 50,000 food service customers through its distribution network.
Post-acquisition, Brakes Group with its 15,000 employees will continue to function as a standalone company within Sysco and be led by CEO Ken McMeikan.
The combined companies are expected to generate sales of approximately $55 billion annually. The acquisition is expected to be accretive to Sysco's earnings immediately.
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We note that Sysco has been carrying out various acquisitions over the years to grow its distribution network and customer base and boost long-term growth. The company expects to achieve 0.5%-1% sales growth through acquisitions in the long term.
This week, Sysco announced the acquisition of an innovative e-commerce platform named Supplies on the Fly. This platform will allow Sysco customers to place orders for more than 170,000 products online or by telephone. It will offer restaurant supplies and equipment exclusively to Sysco customers.
In Feb 2016, the company had announced the acquisition of North Star Seafood, which distributes high-quality fresh and frozen seafood to a combination of local, wholesale, cruise, export and retail customers throughout Florida.
Last year, Sysco acquired 50% stake in Mexico based Pacific Star Foodservice, which gave it access to distribution centers in regions where Pacific Star is the leading distributor. This partnership also allowed Sysco to enhance its service to U.S. customers. The company also announced the acquisition of Tannis Trading in Canada. Tannis operates in the Ottawa market, the fourth largest in Canada. This acquisition, which remains subject to regulatory approval, will allow the company to expand its sales in Canada.
Sysco currently has a Zacks Rank #2 (Buy). Some better-ranked food companies include Post Holdings, Inc. POST , The J.M. Smucker Co. SJM and United Natural Foods, Inc. UNFI . All of them sport a Zacks Rank #1 (Strong Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
