When we announced that U.S. Foodservice was going to be sold to some high-flying financiers, it bode well for U.S. Foodservice. Now the leveraged buy out may wind up not being as leveraged as U.S. Foodservice was unable to sell the bonds it was planning to as part of its acquisition by Clayton, Dublier & Rice and Kohlberg, Kravis & Roberts.
An initial financing plan that included PIK or payment-in-kind bonds, that would have allowed U.S. Foodservice to pay its interest in additional bonds if need be, was first scaled back in size and made less aggressive in terms, before being cancelled all together. It was not clear if the deal itself was at any risk.
Whatever happens with the financing, U.S. Foodservice has quite a hill to climb if it hopes to be competitive nationally with Sysco.
Back at the end of May, Sysco gave a presentation at the Sanford Bernstein Annual Strategic Decisions Conference. The slide below, excerpted from the presentation, shows how overwhelming is Sysco’s position among broadline foodservice distributors:
It is a great presentation because it shows how exceptional is Sysco’s reach. This is a company that did 40,000 business reviews — intensive 3 to 4 hour meetings with customers — in Fiscal 2006 and did 32,000 more in the first three quarters of fiscal 2007.
Even better Sysco reports a mid-teen sales improvement with the average customer after going through the process.
You can see the slideshow here.