Sysco Ends Plans to Merge With US Foods

30 Jun 2015 | Author: | No comments yet »

Regulators Just Effectively Killed Another Big M&A Deal.

WASHINGTON • Following a successful government lawsuit to block the deal, Sysco Corp., the biggest U.S. food distribution company, dropped plans to merge with US Foods, its biggest rival, Sysco said on Monday. Cancellation of the deal means Sysco will have to pay a $300 million breakup fee to US Foods and another $12.5 million to a second company, which had agreed to buy 11 facilities that Sysco hoped to sell in order to satisfy U.S. antitrust regulators. The deal’s cancellation comes just days after a federal judge granted the Federal Trade Commission’s request for an injunction on antitrust grounds. SYY -2.16 % abandoned its planned acquisition of rival US Foods Inc. following a federal judge’s ruling against the deal, forcing the food-distribution giant to find a new strategy for its future that is likely to include smaller acquisitions.

Sysco has also decided to spend $3 billion over the next two years to buy back shares, in addition to share purchases it already does, the company said. In December 2013, private equity firms KKR & Co. and Clayton, Dubilier & Rice agreed to sell privately held US Foods to Sysco for $3.5 billion, or an enterprise value of roughly $8.2 billion, a merger that would have combined the two largest foods distributors in the United States.

Sysco, the nation’s largest purveyor of food and other supplies to restaurants and cafeterias, had been working on the merger for more than a year and a half when U.S. The FTC had argued that a deal combining the top two companies in the industry would create a behemoth that could raise prices on goods delivered to national customers like hotel and hospital chains, which need delivery of a broad range of products, ranging from vegetables to cleaning supplies. State attorneys general in California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee, North Carolina, and the District of Columbia joined the FTC in its complaint this February.

Bill DeLaney, Sysco’s chief executive, said that after reviewing its options, including whether to appeal the judge’s decision, the company determined it was best to move on. “We’ve turned the page,” Mr. The FTC was worried that that would tilt the power too heavily in favor of the foodservice distribution service companies, hurting customers like restaurants, hospitals, hotels and schools, which could have faced higher prices. Yet Deutsche Bank analyst Karen Short argues Sysco’s shares could rise — “albeit not to the same degree that a Sysco/US Foods’ merger could” — because of the potential for buybacks.

In May, it sued to stop the proposed $1.9 billion merger of medical technology provider Steris Corp. and British sterilization services provider Synergy Health. As for the company’s next step – its “Plan B” – Bania anticipates an Investor Day in September where the company will unveil more details regarding its next step.

As she wrote: …we had estimated potential stock price downside risk to ~$33 for SYY shares under a scenario in which the FTC prevails in court (see our 5/5/15 note here); however, our downside scenario does not take into account any potential plan B scenarios (buybacks, other acquisitions, etc.), in which Sysco may pursue other ways to enhance shareholder value, which we believe the market already anticipates at this point. Sysco had said combining with its largest rival was vital because it would help the companies reduce costs and pass along those savings to customers, while other competitors would step up to vie for the No. 2 slot. She adds that while Sysco lost time and money in attempting this merger, the company probably doesn’t have to worry about competition from a larger rival.

Sysco has recently commented that, in the event of the merger being blocked, it would consider acquisitions in adjacent industries (potentially including but not limited to the grocery distribution business) and/or other international geographies as well as ongoing pursuit of acquiring smaller companies. The evidence shows that Sysco and US Foods were strong rivals in broadline food distribution whose combination would have harmed consumers,” Debbie Feinstein, director of the regulator’s Bureau of Competition, said in a statement. In terms of a potential buyback, we note that Sysco is required to defease the $5 billion in debt that had been issued late last year specifically to fund the acquisition, so the timing of a large-scale buyback (if, in fact, part of the eventual plan B scenario) may take more time than some may expect. In this respect, KKR was a leader after selling Alliance Boots to Walgreens in 2012, and Big Heart Brands, formerly known as Del Monte Foods , to J.M.

Still, not everyone is confident Sysco can bounce back from this. “Sysco has embraced cost-reduction efforts before without much bottom-line benefit,” said Guggenheim analyst John Heinbockel.

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UPDATE 1-Western Refining to buy rest of Northern Tier

20 Jan 2016 | Author: | No comments yet »

JPMorgan Chase & Co. Upgrades Northern Tier Energy LP (NTI) to “Neutral”.

Under the deal, Northern Tier unit holders would receive $15 a unit in cash and 0.2986 Western Refining share for each common unit held, or roughly $26.21 a unit based on Monday’s close. EL PASO, Texas and TEMPE, Ariz., Dec. 21, 2015 (GLOBE NEWSWIRE) — Western Refining, Inc. (NYSE:WNR) and Northern Tier Energy LP (NYSE:NTI) today jointly announced that they have entered into a merger agreement whereby Western will acquire all of NTI’s outstanding common units not already owned by Western. Northern Tier Chief Executive Dave Lamp in prepared remarks Monday said that the MLP model “has not been rewarded by the equity market, as evidenced by the historical disconnect between NTI’s high yield and low unit price.” “With a simplified corporate structure and diverse geographic base, the new Western will be well positioned to unlock additional value for shareholders,” Mr. As an alternative to the cash and stock consideration, each NTI unitholder may elect to receive, per NTI unit, either $26.06 in cash or 0.7036 of a share of WNR.

Assuming completion of the proposed transaction, NTI will become a wholly-owned subsidiary of WNR and NTI common units will cease to be publicly traded. Jeff Stevens, President and CEO of WNR said, “The merger of Western and NTI will result in the combined entity owning three of the most profitable independent refineries on a gross margin per barrel basis, with direct pipeline access to advantaged crude oil combined with an integrated retail and wholesale distribution network. The terms of the merger agreement were approved by the WNR Board of Directors and the Conflicts Committee of the Board of Directors of NTI’s general partner, which negotiated the terms on behalf of NTI. Four investment analysts have rated the stock with a hold rating, five have assigned a buy rating and one has issued a strong buy rating to the stock.

The call and slide presentation can be accessed on the Investor Relations section of Western’s website,, and on the Investor Relations section of Northern Tier’s website at The Company has refining, retail and logistics operations that serve the Petroleum Administration for Defense District II (PADD II) region of the United States. Goldman Sachs & Co. acted as financial advisor to Western, and Vinson & Elkins, Davis Polk & Wardwell and Richards Layton & Finger acted as legal counsel to Western. This press release includes “forward-looking statements” by Western (which are protected as forward-looking statements under the Private Securities Litigation Reform Act of 1995) and by NTI.

The Company’s retail segment operated 165 convenience stores under the SuperAmerica brand and also supported 89 franchised convenience stores, which are also operated under the SuperAmerica brand. These statements are subject to the risk that the merger is not consummated at all, including due to the inability of Western or NTI to obtain all approvals necessary or the failure of other closing conditions, as well as to the general risks inherent in Western’s and NTI’s businesses and the merged company’s ability to compete in a highly competitive industry.

If you are reading this article on another website, that means this article was illegally copied and re-published to this website in violation of U.S. and International copyright law. In addition, Western’s and Northern Tier’s business and operations involve numerous risks and uncertainties, many of which are beyond Western’s and NTI’s control, which could materially affect their respective financial condition, results of operations and cash flows and those of the merged company.

The forward-looking statements are only as of the date made, and neither Western nor NTI undertake any obligation to (and each expressly disclaims any obligation to) update any forward-looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval in any jurisdiction where such an offer or solicitation is unlawful. Any such offer will be made only by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, pursuant to a registration statement filed with the SEC. The retail segment includes retail service stations, convenience stores, and unmanned fleet fueling locations in Arizona, Colorado, New Mexico, and Texas. Beyersdorfer (602) 286-1530 Michelle Clemente (602) 286-1533 Northern Tier Investor and Analyst Contact: Paul Anderson (651) 458-6494 Alpha IR Group (651) 769-6700 Media Contact: Gary Hanson (602) 286-1777

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