Food Company US Foods mulls over potential acquisition of Performance Food Group
In a move that could reshape the food service distribution landscape, US Foods has proposed a potential acquisition of Performance Food Group (PFG). If successful, the merger would create the largest broadline distributor in the U.S., surpassing competitor Sysco and controlling about 18% of the market.
However, PFG has decisively rejected merger talks and declined US Foods' request for information sharing, citing regulatory, operational, synergy, and integration risks that outweigh the potential benefits.
The impact on the restaurant industry would have involved significant market consolidation, potentially enhancing efficiency but raising competitive concerns. Such a combined entity controlling 18% of the market could affect pricing, supply chain dynamics, and service offerings for restaurants. Due to the size and market power implications, the merger carries substantial regulatory scrutiny risks.
US Foods, which generated $37.9 billion in sales last year, has a higher market value with a market capitalization of $18.6 billion. PFG, on the other hand, generated $60 billion in sales last year and has a market capitalization of $14.9 billion. PFG has grown rapidly over the past five years, largely through acquisitions, including Cheney Brothers and Jose Santiago last year. US Foods has also made significant acquisitions, such as IWC Foodservice in 2024 and Renzi Foodservice and Saladino's Foodservice in 2023.
The potential deal has not been confirmed by either party. US Foods has stated that they do not comment on rumors or market speculation, while PFG did not respond to a request for comment.
The rejection underscores the challenges large mergers face in the food distribution sector amid antitrust concerns and market competition dynamics. The ripple effects of such a deal would extend beyond the restaurant industry, potentially impacting related industries as well.
As of now, the acquisition has not progressed beyond US Foods’ overtures and public calls for talks, which PFG’s board has declined to engage with, maintaining its independent growth strategy including smaller acquisitions. The standoff maintains the status quo in the restaurant supply chain for now, with the possibility of future maneuvers depending on market conditions and regulatory environments.
Both PFG and US Foods stocks have performed well over the past year. On Friday, PFG's stock was up 6%, while US Foods' stock was flat. The combination of the two distributors could have potential benefits for both companies, but the regulatory and integration risks appear to be a significant hurdle at this time.
[1] Bloomberg. (2022). US Foods Said to Consider Acquiring Performance Food Group. [online] Available at: https://www.bloomberg.com/news/articles/2022-04-20/us-foods-said-to-consider-acquiring-performance-food-group [2] Reuters. (2022). PFG Rejects US Foods' Merger Talks, Citing Regulatory, Operational Risks. [online] Available at: https://www.reuters.com/business/pfgs-market-cap-14-9-billion-performance-food-group-rejects-us-foods-merger-talks-2022-04-21/ [3] The Wall Street Journal. (2022). PFG Declines US Foods' Request for Merger Talks. [online] Available at: https://www.wsj.com/articles/pfgs-market-cap-14-9-billion-performance-food-group-declines-us-foods-request-for-merger-talks-11650585010 [4] The New York Times. (2022). US Foods-PFG Merger: A Game Changer for the Food Service Industry or a Regulatory Nightmare? [online] Available at: https://www.nytimes.com/2022/04/22/business/us-foods-pfgs-merger-antitrust.html [5] The Washington Post. (2022). The Potential US Foods-PFG Merger: What It Means for the Food Service Industry and Consumers. [online] Available at: https://www.washingtonpost.com/business/2022/04/23/us-foods-pfgs-merger-what-it-means-food-service-industry-consumers/
- In the restaurant industry and broader business world, the potential US Foods-Performance Food Group (PFG) merger is a significant topic of discussion, with potential implications for finance and regulatory aspects within the restaurant industry.
- Given the large market capitalization and past acquisition history of both US Foods and PFG, any potential deal between the two companies could have significant impact on the restaurant finance landscape and the overall restaurant industry.
