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US Foods approved to acquire SGA’s Food Group of Companies

ROSEMONT, Ill.–(BUSINESS WIRE)–US Foods Holding Corp. BB #:134354 today announced that it has received conditional approval from the Federal Trade Commission to acquire SGA’s Food Group of Companies (SGA Food Group) for $1.8 billion in cash.

The five operating companies being acquired are Food Services of America, Inc. (FSA) BB #:142745, Systems Services of America, Inc., Amerifresh, Inc. BB #:127803, Ameristar Meats, Inc. and GAMPAC Express, Inc. US Foods expects to close the acquisition in the next few days.

As a condition to receiving regulatory clearance from the FTC, US Foods will divest three FSA distribution facilities located in Kent (Seattle), Wash.; Meridian (Boise), Idaho; and Fargo, N.D. US Foods plans to retain a portion of the business currently serviced from the Kent facility.

Divestiture proceeds of approximately $90 million will be used to reduce US Foods’ debt. The combined annual Adjusted EBITDA of the facilities to be divested was approximately $21 million for fiscal 2018. Definitive agreements for each of the divestitures have been entered into with each of the respective buyers, and we expect to close these transactions within 30 days following the completion of the SGA Food Group acquisition.

“We are excited to finalize this transaction and enhance our overall scale and footprint in the attractive Northwest and West regions. Both companies share a strong commitment to innovation and customer service, which will enable us to bring US Foods’ industry leading product innovation and technology to SGA Food Group customers as well as to share SGA Food Group’s unique center of plate, produce and logistics capabilities with US Foods customers,” commented US Foods Chairman and CEO Pietro Satriano. “We look forward to welcoming SGA Food Group and their talented team members to US Foods.”

US Foods is increasing the estimated annual run-rate for synergies from $55 million to $65 million, despite the divestiture of three facilities, and expects to achieve the full run rate of synergies by the end of fiscal 2023. Estimated one-time costs of $45 million, inclusive of anticipated capital expenditures, are expected to achieve these synergies.

The transaction is expected to be modestly accretive to fiscal 2019 Adjusted Diluted EPS and mid-single digit accretive to fiscal 2020 Adjusted Diluted EPS.

Outlook for Full Year Fiscal 2019
The company is updating the following elements of its previously provided full year fiscal 2019 guidance. All other elements remain unchanged.

Adjusted EBITDA: before synergies, SGA Food Group is expected to contribute approximately $30 million to Adjusted EBITDA for the remainder of fiscal 2019 and approximately $105 million on an annual run rate basis for fiscal 2019.

Interest Expense and Depreciation and Amortization: for the remainder of 2019, interest expense is expected to increase by approximately $25 million and depreciation is expected to increase by $3 million from the addition of SGA Food Group’s existing assets. Intangible amortization for this transaction and prior acquisitions will also be excluded from the calculation of Adjusted Diluted EPS.

Pro Forma Net Leverage: upon closing of the acquisition, US Foods’ pro forma net leverage is expected to be approximately 4.0x. US Foods expects to reduce net leverage to approximately 3.0x by the end of fiscal 2021.

2019 Adjusted Diluted EPS: the company is increasing its Adjusted Diluted EPS range to $2.30-2.40 for full year fiscal 2019, inclusive of expected accretion from the transaction and the exclusion of intangible amortization.

About US Foods
US Foods is one of America’s great food companies and a leading foodservice distributor, partnering with approximately 250,000 restaurants and foodservice operators to help their businesses succeed. With 25,000 employees and more than 60 locations, US Foods provides its customers with a broad and innovative food offering and a comprehensive suite of e-commerce, technology and business solutions. US Foods is headquartered in Rosemont, Ill., and generates more than $24 billion in annual revenue. Visit to learn more.

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MEDIA: Sara Matheu