Over the course of the last week of July, two food industry deals were announced with a combined value of nearly $5 billion.
On July 26, United Natural Foods announced it had agreed to acquire SUPERVALU, one of the largest grocery wholesalers and retailers in the U.S., for approximately $2.9 billion including the assumption of outstanding debt and liabilities.
Although there has been a lot of movement in the wholesale sector in recent years, this deal will create a unique player in the field – one that distributes both organic and natural foods as well as conventional, and can give buyers a greater diversification on offerings.
“Combining our leading position in natural and organic foods with SUPERVALU’s presence in fast-turning products makes us the partner of choice for a broader range of customers,” said Steve Spinner, UNFI’s Chief Executive Officer and Chairman. “Together, we can provide our “better for you” products as well as other high-growth segments, improving customers’ competitive advantages in a dynamic marketplace.”
The deal will also position UNFI to capitalize upon SUPERVALU’s strength in perishable foods, a category which the company has seen sales jump from 9 percent of the business to 20 percent in only one year between 2017 and 2018, reports Food Dive.
“The SUPERVALU fresh business – produce, protein and all the fast-growing categories our customers need at an efficient price, we are now able to grow nationally, which is a great opportunity for the combined company,” said Spinner.
The deal is expected by UNFI to generate synergies in the region of $175 million within the first three years, as the combined entity can leverage scalable systems to achieve higher rates of efficiency.
“These benefits, plus our increased efficiency and productivity, will enable us to create value for our shareholders, enhance opportunities for our suppliers, provide a broader assortment for our customers and create new prospects for our associates over the long term, ” said Spinner.
Four Days Later…
Only four days later, on July 30, US Foods and Services Group of America (SGA) announced an agreement through which US Foods will acquire five operating companies: Food Services of America, Systems Services of America, Amerifresh, Ameristar Meats, and GAMPAC Express, which are collectively known as SGA’s Food Group of Companies for $1.8 billion in cash.
The deal will bring together two heavy hitters in the food distribution arena – Illinois-based US Foods with $2.4 billion in annual revenue, and Arizona-based SGA’s Food Group of Companies with combined net sales of $3.2 billion.
“This acquisition will significantly increase US Foods’ reach across key markets in the attractive and growing Northwest region of the U.S. and adds one of the most well-regarded regional distributors to our company,” said Pietro Satriano, chairman and CEO, US Foods.
Not only will the deal increase geographic reach, but it is expected to achieve $55 million in annual run-rate cost synergies by the end of fiscal year 2022 driven by distribution, procurement, and administrative savings.
The addition of the five SGA entities will give US Foods an additional 33,000 customers, 12 distribution centers, and add more than 20 private brands to its roster.
“With a shared commitment to customer service, including a proven track record of leveraging technology and private brands to meet customer needs, SGA’s Food Group of Companies is an ideal fit. The company’s unique merchandising programs, mature local sourcing capabilities and track record of operational excellence will be strong additions to our business,” said Satriano.
-Lynda Kiernan