Daily Management Review

London-based Brakes Group to be Bought for $3.1 Billion by US Based Sysco


02/22/2016




London-based Brakes Group to be Bought for $3.1 Billion by US Based Sysco
With the aim to strengthen its presence in Europe, the largest U.S. food distributor, Sysco Corp, is all set to purchase London-based food distributor Brakes Group from Bain Capital Private Equity. The deal is estimated to be valued at about $3.1 billion.

Sysco Corp announced this takeover on Monday.
 
Sysco said in a statement that was issued from the US that the repayment of about $2.3 billion of Brakes' debt is included in the deal. The company said that it expects that the deal would immediately add to its earnings.
 
Eight months ago, the winning of a lawsuit by the Federal Trade Commission that essentially blocked a deal worth $3.5 billion where Sysco had intended to purchase smaller rival US Foods. The deliberations and the law suit went on for 18 months till Sysco opted out of the pursuit. This deal comes eight months after the let off.
 
In 2007 Bain had bought Brakes for about 1.3 billion pounds ($1.83 billion) for which Sysco had also laid a bid. However Bain walked away at an early stage.
 
The global stock market decline had halted the plans of Brakes to get itself listed on the London Stock Exchange in January, reported The Guardian. The company was taken private by Clayton, Dubilier & Rice Inc in 2002.
 
The Brakes Group has operations in the United Kingdom, Ireland, France, Sweden, Spain, Belgium and Luxembourg and had started off as a poultry supplier in 1958.
 
The present Chief Executive of the company Ken McMeikan would lead the new company that would be operated as a standalone company within Sysco.
 
Annualized sales of about $55 billion are expected to be generated by the combined company.
 
Only $806.4 million, or 1.7 percent of its revenue was generated by Sysco from its operations outside the United States and Canada for the year ended June 2015. Brakes had revenue of nearly $5 billion in fiscal 2015.

The deal is expected to be completed before the end of Sysco's fiscal year in July 2016 pending regulatory scrutiny, review and approval by European Union competition authorities.
 
While Freshfields Bruckhaus Deringer LLP and Ernst & Young LLP acted as legal and due diligence advisers to Sysco, Deutsche Bank Securities advised the company on financial matters.
 
The role of financial and legal advisers to Bain Capital Private Equity and Brakes Group was done by Goldman Sachs International and Baker & McKenzie LLP.
 
Sysco's shares were down 1.5 percent at $44.30 in early trading on Monday.
 
(Source: www.reuters.com) 






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