Performance Food to Buy Rival Supplier Reinhart for $2 Billion

(Bloomberg) -- Performance Food Group Co. agreed to buy Reinhart Foodservice for $2 billion in a combination of U.S. food suppliers.

Performance, a distributor for retailers and resultants, will buy Reinhart from its owner, Reyes Holdings LLC, in an all-cash deal, the company said in a statement Monday. Together with Reinhart, Performance's sales will rise to about $30 billion.

The deal shows how food-service companies are under pressure to consolidate as costs climb. Truckers' demands for higher wages, for example, have squeezed already low profit margins. By combining with Reinhart, Performance aims to save $50 million in costs annually within three years.

Performance estimates it will get a tax benefit of $265 million. Including that, the price is a multiple of 10.6 times Reinhart's estimated adjusted earnings when excluding interest, taxes, depreciation and amortization.

Performance's shares rose as much as 3.1%, the most in almost a month, to $41.26 on Monday. The stock has gained about 27% this year.

Geographic Reach

Closely held Reinhart, based in Rosemont, Illinois, will give Performance a broader geographic reach, Performance said.

“This transaction provides us with greater overall scale, a diverse customer base, including a solid base of independent customers, and builds upon our strong distribution platform,” Performance Chief Executive Officer George Holm said.

Richmond, Virginia-based Performance Food also increased the bottom range its 2019 outlook for adjusted Ebitda to a range of 9% to 10%, up from a previous lower level of 8%.

Credit Suisse AG acted as Performance's financial adviser in the deal, which is expected to close by the end of 2019.

The transaction will be financed with the company's asset-based revolving credit facility and $300 million to $400 million of new senior unsecured notes. Financing was provided by Credit Suisse and Wells Fargo & Co.

To contact the reporter on this story: Eric Pfanner in London at epfanner1@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier, Jonathan Roeder

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