By Lynda Kiernan
US Foods Holding Corp. (US Foods) announced that affiliates of KKR have invested $500 million in the company via newly issued convertible preferred stock. KKR is funding the investment through its KKR Americas XII Fund.
Headquartered in Rosemont, Illinois, US Foods has more than 70 locations, 28,000 employees, and partnerships with approximately 300,000 restaurants and foodservice operators, offering a comprehensive and innovative portfolio of foods and a suite of e-commerce, technology, and business solutions.
Generating more than $8 billion in yearly revenue, the company is one of the world’s leading food distributors, and this investment will be used to strengthen its balance sheet to weather the challenges being faced by the COVID-19 pandemic.
“We are pleased to see KKR return as a shareholder of US Foods as we seek to further fortify our balance sheet during the current difficult environment,” said Pietro Satriano, chairman and CEO, US Foods.
“KKR will be a valuable partner for us as we continue to focus on our associates, customers, communities and shareholders as the impacts of COVID-19 unfold. This transaction positions us to continue to build on our strengths as the environment improves over time.”
At a time when more than half of all food eaten had been consumed outside the home, the immediate shifts to food distribution channels has been jolting as restaurants, schools, theaters, and stadiums close, and demand soars for foods to be prepared and eaten at home.
“We are excited to once again partner with the strong management team at US Foods,” said Nate Taylor, partner and co-head of America’s private equity, KKR. “Given our history as a long term investor in the company, we are very familiar with the sector and US Foods’ leading position and believe the company has the capabilities and resources to navigate the current environment and create value over the long term.”
Under the terms of the deal, KKR’s $500 million convertible preferred stock carries a 7 percent dividend, payable in-kind in its first year, and in cash or in-kind at US Foods’ option, thereafter. The stock will be convertible to US Foods common stock at a conversion price of $21.50 per share, representing approximately 9.6 percent of pro forma common shares outstanding.
Also, as part of the deal, US Foods expects to appoint Nate Taylor as the new director of its Board.
Additionally, US Foods announced the expected close on April 24 of its acquisition of Smart Foodservice Warehouse Stores previously announced on March 6, 2020.
Founded in 1955 and headquartered in Portland, Oregon, Smart Foodservice operates 70 small-format cash and carry stores across California, Washington State, Oregon, Idaho, Nevada, Utah, and Montana serving small and mid-sized restaurants and food business customers. In 2019, the company saw revenue of approximately $1.1 billion, and about $85 million in adjusted EBITDA.
“As we continue to expand our multi-channel strategy, we know customers, particularly independent restaurants, increasingly use cash and carry as a convenient, cost-effective purchasing option,” said Pietro Satriano, chairman and CEO, US Foods in March. “With an established footprint and a consistent record of profitable growth, Smart Foodservice will complement our CHEF’STORE cash and carry model and provide a platform to significantly accelerate our presence in this attractive, growing channel.”
– Lynda Kiernan is Editor with GAI Media and daily contributor to the GAI News and Agtech Intel platforms. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.
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