Sysco Corporation (SYY) completed the acquisition of four independent foodservice companies in December 2012. These companies are as follows:
• Appert’s Foodservice in St. Cloud, Minnesota
• Buchy Food Service, in Greenville, Ohio
• Central Seafood Company, in Orlando, Florida
• Distagro, the foodservice division of Montreal, Quebec-based grocery retailer, Metro Richelieu Inc.
The aggregate annual revenues of these four companies are $520 million.
A peer of Procter & Gamble Co. (PG), Sysco believes in growing through acquisitions, since the company operates in a highly fragmented industry. It intends to achieve sales growth of 0.5% to 1% through acquisitions in the long term. To date, the company has already acquired a total of 9 companies, whose aggregate annual revenue is over $750 million.
Among its acquisitions, Sysco has made three acquisitions in Ireland. Having acquired Pallas Foods in 2009, Sysco acquired Crossgar Foodservice, a leading supplier in Northern Ireland, in August 2012 and the foodservice distribution division of Keelings in October 2012.
The takeover of Distagro's foodservice division will complement Sysco's growing presence in the competitive Quebec market as it supplies food products to customers with operations in Quebec and Eastern Canada.
Sysco Corporation carries a Zacks Rank #3 (Hold). We have a Neutral recommendation on Sysco Corporation.
We appreciate the company’s strategy of growth through acquisitions and its efforts to reduce cost and improve efficiency. However, we are concerned about rising costs due to fuel price hikes and other inputs, which hurt margins.
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