One potentially attractive target could be Performance Food Group Inc., Sysco CEO Bill DeLaney and CFO Chris Kreidler said. The executives were interviewed Tuesday after they concluded a formal presentation on their company at the Consumer Analyst Group of New York Conference in Boca Raton, Fla.
Performance, the U.S.'s third-largest food distributor, was acquired by Wellspring Capital Management LLC and Blackstone Group LP for about $1.3 billion in January 2008.
In addition, Sysco could service up to $6 billion in debt while remaining investment grade, 4 times its roughly $1.5 billion in Ebitda it generates on an annual basis, they said. (A company spokesman later said Ebitda was closer to $2.3 billion.)
Sysco has about $3 billion in debt, meaning it has about $3 billion in free debt capacity it can use for large acquisitions, the executives said. According to the company's latest 10-Q filing with the Securities and Exchange Commission on Feb. 5, it had about $2.8 billion in long-term debt and $320 million in cash for the quarter ended Dec. 29.
If and when the private equity firms put Performance Food, with its more than $10 billion in revenue, on the auction block, Sysco will be a bidder or participant, the executives said.
Blackstone and Wellspring, however, will want a premium for their investment, DeLaney and Kreidler cautioned, and there may be antitrust concerns, which could affect the ultimate decision of whether to buy.
DeLaney and Kreidler also emphasized that despite their expressions interest, there are no current negotiations.
Performance Food and Wellspring declined to comment, while Blackstone did not respond to requests for comment.
The two executives also said that Sysco could be interested in Berkshire Hathaway Inc.-owned McLane Co., if it were to ever be sold. However, there are no discussions for the company, they said.
McLane, a supply chain company for grocery and foodservice customers, is a $33 billion-plus business based in Temple, Texas.
Neither Berkshire Hathaway nor McLane responded to requests for comment by press time.
Kreidler said during the conference presentation that acquisitions have been a key part of Sysco's growth and that the company will continue to play a role in industry consolidation. The company expects growth of about 1% this year, which works out to $400 million of its more than $40 billion in revenue. For its fiscal year 2012, ended June 30, Sysco had total revenue of $42.4 billion and net earnings of $1.1 billion, according to its latest 10-K filing.
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