sysco

Sysco's shares gained $4.27, or 12.45%, Monday after it announced it would buy rival US Foods for $3.5 billion. (Ycharts / December 9, 2013)

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Food distributor giant Sysco announced Monday it will buy rival US Foods for $3.5 billion in cash and stock, creating the largest food and restaurant supplier in the country.

The deal, if approved by regulators, would value the transaction at $8.2 billion. Executives said the merger would bring annual sales of about $65 billion, up from about $44 billion currently.

Under the terms of the deal, Sysco will pay about $3 billion in stock and $500 million in cash for US Foods. Sysco will also assume $4.7 billion in US Foods' net debt. The merger will give current US Foods equity holders a roughly 13% stake in the company. 

The transaction is expected to close in the third quarter of 2014 and would boost Sysco's market share in the food and restaurant distribution business from 18% to 25%, the company said.

Sysco, based in Houston, currently has a network of 193 distribution centers and about 425,000 customers that include hotels, restaurants, schools, hospitals and other institutions. 

"Sysco and US Foods have highly complementary core strengths," said Bill DeLaney, Sysco's chief executive, in a statement. "We look forward to welcoming US Foods' talented employees and continuing to invest in the development of all of our people."

News of the merger boosted shares of the company by $4.27, or 12.45%, to $38.58 Monday. 

[For the record, 11:50 a.m. PST Dec. 9: An earlier version of this post said the value of the combined company would be $8.2 billion. That figure represents the value of the deal, including the assumption of US Foods debt.

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