Food service giant Sysco announced Monday it will acquire wholesale supplier Jetro Restaurant Depot in a massive $29 billion transaction that includes debt, broadening the nation’s largest food distributor’s access to budget-focused independent restaurants.
Sysco’s stock dropped approximately 12% following news that the company plans to fund the purchase through $21 billion in new and hybrid debt, combined with $1 billion in cash and equity. The food distributor currently holds a market value of $39.2 billion.
This major acquisition joins a wave of significant deals across consumer industries, as companies including Unilever, Estee Lauder and Pernod Ricard pursue mergers to achieve greater scale amid weakening demand and elevated operational costs.
The family-owned Jetro Restaurant Depot runs wholesale cash-and-carry operations where buyers pay immediately for products including food items, drinks and takeout packaging. This business model will complement Sysco’s existing delivery services to restaurants, medical facilities and hotels.
Through this acquisition, Sysco gains entry into the profitable cash-and-carry sector, where Restaurant Depot maintains approximately 166 warehouse facilities spanning 35 states nationwide.
“Sysco and Jetro Restaurant Depot will enhance value for small independent restaurants and the consumers they serve by expanding access to more affordable, fresh food products and delivering more choice and convenience,” stated Sysco CEO Kevin Hourican, emphasizing how the merger would reduce costs for additional customers.
Restaurant Depot stockholders will obtain $21.6 billion in cash plus 91.5 million Sysco shares valued at roughly $7.5 billion based on Friday’s closing price, granting them about 16% ownership in the merged entity.
Previously, US Foods abandoned merger discussions with Performance Food, which would have united the country’s second and third-largest foodservice distributors to compete against market leader Sysco while cutting expenses.
In 2015, a federal judge approved the Federal Trade Commission’s petition to halt Sysco’s $3.5 billion US Foods purchase after regulators claimed the deal would establish a dominant company capable of increasing prices for national clients.
During an analyst conference call, Hourican noted “There is minimal overlap between Sysco and Restaurant Depot’s customers.” The company plans to establish over 125 additional Restaurant Depot sites within the next two decades using its extensive supply network.
Sysco anticipates the deal will increase earnings per share by a mid-to-high single-digit percentage during the first year following completion, expected by the third quarter of fiscal 2027.
Credit agency Fitch assigned Sysco a “rating watch negative” status, while Moody’s initiated a review for potential downgrade after the announcement.
The corporation suspended its share buyback initiative while maintaining its annual projections. Sysco, recognized for providing steaks, fish fillets and frozen products to fast-food chains like KFC and Subway, increased its full-year earnings outlook earlier this year as customer demand remained steady despite economic uncertainties.
