US Foods Holding Corp. approached Performance Food Group Co. to explore the merits of a combination and its invitation was declined, according to US Foods Chief Executive Officer Dave Flitman.
“We believe that a combination with PFG has the potential to create significant value for both companies and our collective stakeholders, while enhancing competition in the food-service industry,” Flitman said on a conference call discussing US Foods’ quarterly results. “Our ask of PFG is to simply work together to further understand the merits and opportunities of a potential combination.”
The decision to make the approach public is an unusual move that could put pressure on Performance Food to engage in talks.
The comments confirm a Bloomberg News report last month that US Foods expressed interest to Performance Food about a potential combination that would create a food distribution company with combined sales of roughly $100 billion.
A spokesperson for PFG didn’t immediately respond to a request for comment.
Flitman on the call listed merits of a potential combination including “economies of scale,” operational efficiencies, expanded growth prospects and complementary geographic reach.
The combined company would become the No. 1 US food-service distributor, with 18% of the $371 billion market, according to Bloomberg Intelligence. That would surpass current market leader Sysco Corp., which has a 17% share, senior industry analyst Michael Halen wrote in a research note.
Performance Food has a strong footprint in independent pizzerias, convenience stores and candy and snacks — all areas where US Foods is underexposed, he said. A deal would create “meaningful scale and synergies,” though it would hurt US Foods’ Ebitda margins, according to Halen.
US Foods supplies restaurants, hospitals, schools and hotels, generating revenue of $37.9 billion last year. The company employs about 30,000 people in more than 70 locations, according to its website.
Source: Mint