Sysco Gets European Commission Nod For Brakes Group Buy

Shares of Sysco Corp. (NYSE:SYY) were up 0.66% as the largest U.S. food distributor received antitrust approval from the European Commission to acquire leading European foodservice distributor, Brakes Group, announced in Feb 2016.

Per the Commission, the $3.1 billion deal would not have a negative effect on consumers, hospitals, schools and other clients which purchase chilled, frozen and ambient food from the companies.

The acquisition, which is expected to close in early Jul 2016, will expand the global food product maker’s footprint in Europe.

Brakes Group, currently owned by Bain Capital Private Equity, operates in major European countries, namely, the U.K., Ireland, France, Sweden, Spain, Belgium and Luxembourg. In fiscal 2015, Brakes Group generated revenues of nearly $5 billion, up 6.5% year over year. It supplies almost 50,000 products including 4,000 own-brand items to roughly 50,000 food service customers through its distribution network.

Following the acquisition, Brakes Group with its 15,000 employees will continue to function as a standalone company within Sysco and be led by CEO Ken McMeikan.

The combined companies are expected to generate sales of approximately $55 billion annually. The acquisition is expected to be accretive to Sysco’s earnings immediately.

The company has been carrying out various acquisitions over the years to grow its distribution network and customer base and boost long-term growth. The company expects to achieve 0.5%–1% sales growth through acquisitions in the long term.

Along with Brakes Group, the company had also announced the acquisition of North Star Seafood, which distributes high-quality fresh and frozen seafood to a combination of local, wholesale, cruise, export and retail customers throughout Florida, in Feb 2016.

Last year, Sysco acquired 50% stake in Mexico based Pacific Star Foodservice, which gave Sysco access to distribution centers where Pacific Star is the leading distributor. This partnership also allowed Sysco to enhance its service to the U.S. customers. The company also announced the acquisition of Tannis Trading in Canada. Tannis operates in the Ottawa market, the fourth largest in Canada. This acquisition, which remains subject to regulatory approval, will allow the company to expand its sales in Canada.

Sysco currently has a Zacks Rank #2 (Buy). Some better-ranked food companies include Post Holdings, Inc. (NYSE:POST) , Lancaster Colony Corporation (NASDAQ:LANC) and B&G Foods, Inc. (NYSE:BGS) . All of them sport a Zacks Rank #1 (Strong Buy).