Sysco, US Foods merger results in ample commercial real estate

The Sysco and US Foods merger involves a significant amount of commercial real estate.

In an $8.2 billion deal, foodservice giants Sysco Corp. and US Foods agreed to merge, a move that has already been approved by both companies' boards. Now the corporations must figure out what to do with their resulting massive distribution space of a combined 43 million square feet.

"We expect … that there will be a review process and it will take several months and we'll have some good discussions along those lines. So, there could be very well be some divestitures," Bill DeLaney, Sysco president and CEO, told investment analysts. "We've modeled what we can today, and even with some divestitures, we still see this as a very attractive deal."

Chicago-based US Foods is to be folded into Houston-based Sysco, according to CoStar, which representatives say will improve cost synergies and strategic benefits, such as supply chain efficiencies, merchandising activities, and the streamlining of overlapping general and administrative functions.

After three to four years, the merger is expected to save $600 million, so officials have until then to figure out what to do with the distribution space. US Foods has about 14.4 million square feet and leases another 3.78 million in more than 80 facilities around the United States, according to CoStar. Sysco has more than 190 locations, owning more than 21 million square feet and leasing 4.5 million.

Food industry experts have said this merger – which is expected to close in third quarter 2014 – would combine both businesses' strengths. CoStar reported that experts said US Foods excels in "street" service while Sysco is known for dominance in institutional uses, such as cafeterias and other vendors. The deal still is subject to customary closing conditions and regulatory approvals, the source reported.

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