RICHMOND, Va. - Performance Food Group Company (NYSE:PFGC), a leading food and foodservice distribution company, has entered into a definitive agreement to acquire Cheney Bros., Inc., an independent foodservice distributor based in Florida. The $2.1 billion cash transaction is set to enhance PFG's presence in the Southeastern U.S. and is anticipated to close in calendar 2025, subject to regulatory approvals.
Cheney Brothers, which reports annual revenue of approximately $3.2 billion, will join PFG's foodservice segment, potentially creating a significant platform for growth in the region. The acquisition is expected to generate around $50 million of net annual run-rate cost synergies by the third full fiscal year post-close. Moreover, PFG forecasts the deal to be accretive to Adjusted Diluted EPS by the end of the first full fiscal year, inclusive of year 1 synergies.
The purchase price reflects a multiple of 13.0x Cheney Brothers' unaudited Trailing 12 month Adjusted EBITDA, or 9.9x including the expected synergies. The transaction is to be financed through borrowing on PFG's ABL facility and new Senior Unsecured Notes.
PFG Chairman & CEO George Holm expressed enthusiasm for the acquisition, citing the expansion and enhancement of offerings to a diverse customer base, as well as the potential for future growth. Cheney Brothers' CEO Byron Russell also conveyed optimism about joining PFG, highlighting the opportunity for combined success.
The deal aims to leverage PFG's existing distribution platform and increase its geographic reach, with five additional broadline distribution facilities across Florida, Georgia, North Carolina, and South Carolina. It also presents an opportunity to expand the sale of private brands to Cheney Brothers' independent restaurant customers.
Both companies have approved the transaction, with J.P. Morgan and Skadden, Arps, Slate, Meagher & Flom LLP advising PFG, and Morgan Stanley & Co. LLC and Davis Polk & Wardwell LLP advising Cheney Brothers.
This consolidation move in the foodservice distribution industry is based on a press release statement and reflects PFG's strategic efforts to strengthen its market position in the Southeastern United States.
In other recent news, Performance Food Group Co . announced that Patrick T. Hagerty, the Executive Vice President and Chief Commercial Officer, will retire on January 4, 2025. As part of his retirement agreement, Hagerty will continue to be compensated at his current salary rate and will serve as a consultant until June 30, 2025. The company has also expanded its board to 12 members with the addition of Danielle M. Brown, whose extensive IT experience is expected to contribute to the company's strategic vision.
Performance Food Group reported modest sales growth of 0.6% in the third quarter of 2024, with net sales reaching $13.9 billion. However, the net income decreased by 12.3% year-over-year, falling to $70.4 million. Looking ahead, the company anticipates sequential improvement in sales and strong profit growth in the fourth quarter and into fiscal 2025, expecting net sales for fiscal Q4 to be between $15 billion and $15.4 billion, with adjusted EBITDA between $430 million and $450 million.
These are some of the recent developments within the company, highlighting the retirement of a key executive, the addition of a new board member, and the financial outcomes from the recent quarter. The company remains optimistic about long-term growth and plans to deploy cash flow towards strategic investments.
InvestingPro Insights
Performance Food Group Company (NYSE:PFGC) stands as a formidable entity in the Consumer Staples Distribution & Retail industry, and its latest move to acquire Cheney Bros. underscores its strategic ambitions. An InvestingPro Tip highlights PFGC as a prominent player in its industry, which could be a driving factor behind its decision to expand its footprint through this acquisition. The synergy between PFGC's distribution capabilities and Cheney Bros.' regional strength is poised to create a powerful platform for growth in the Southeastern U.S.
InvestingPro Data reveals that PFGC has a market capitalization of $10.44 billion and is trading at a Price-to-Earnings (P/E) ratio of 24.66, which adjusts to 24.88 over the last twelve months as of Q3 2024. This P/E ratio is considered low in relation to the company's near-term earnings growth, an InvestingPro Tip that may be of particular interest to investors considering the potential earnings uplift from the Cheney Bros. acquisition.
PFGC's revenue stands at $54.06 billion over the same period, with a slight quarterly revenue growth of 0.63%. Despite facing a modest dip in revenue growth of -3.26% over the last twelve months, analysts predict the company will remain profitable this year, a sentiment buoyed by its profitability over the same period. Moreover, PFGC does not pay a dividend, which could indicate that the company is focusing on reinvesting its earnings to fuel growth initiatives such as the Cheney Bros. deal.
For more detailed analysis and additional InvestingPro Tips on Performance Food Group Company, interested readers can explore further at https://www.investing.com/pro/PFGC. With 7 more tips available, investors can gain a comprehensive understanding of PFGC's financial health and market position.
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