Performance Food Group Co. and Core-Mark Holding Co. Inc. announced that they have entered into a definitive agreement for Richmond, Va.-based PFG to acquire Westlake, Texas-based Core-Mark in a stock and cash transaction.
Under the terms of the transaction, which has been unanimously approved by the boards of directors of each company, Core-Mark shareholders will receive $23.875 per share in cash and 0.44 PFG shares for each Core-Mark share. The transaction values Core-Mark at approximately $2.5 billion, including Core-Mark’s net debt.
The transaction will create a best-in-class convenience business within PFG’s Vistar segment that will include the Core-Mark and Eby-Brown businesses. The expanded convenience business will operate under the Core-Mark brand and will be headquartered in Westlake, Texas, with Eby-Brown maintaining ongoing operations in Naperville, Ill. Scott McPherson will continue in his role as president and CEO of Core-Mark, following closing of the transaction. Tom Wake will continue as president and CEO of Eby-Brown, reporting to McPherson.
“We are excited to announce the strategic acquisition of Core-Mark and welcome the organization to Performance Food Group,” said PFG Chairman, President & CEO George Holm. “Core-Mark is an outstanding company that we believe will significantly strengthen our business diversification and expansion into the convenience store channel.”
Holm said that the two organizations have similar cultures and expects a smooth integration and transition process.
Core-Mark is one of the largest wholesale distributors to the convenience retail industry in North America with approximately $17 billion in net sales. The company has approximately 7,500 employees and operates 32 distribution centers across the United States and Canada. Core-Mark services approximately 40,000 customer locations in all 50 states in the U.S., five Canadian provinces and two Canadian territories.
McPherson said that the transaction brings together two companies known for their customer-focused approach and dedication to their employees.
“The combination of our two highly complementary businesses creates an even stronger platform to drive growth, as we deliver a best-in-class offering to our customers,” said McPherson. “I’d like to thank the entire Core-Mark team for their hard work and focus in helping us reach this exciting milestone.”
Strategic and Financial Benefits
- Accelerates PFG’s diversification and adds highly complementary assets in the convenience store channel: With the closing of this transaction, PFG will add approximately $17 billion of net sales, resulting in total PFG pro-forma LTM net sales of approximately $44 billion.
- Adds complementary customer-centric operating model: Core-Mark brings a consistent go-to-market approach with a selling culture focused on customer success.
- Enhances attractive customer base and product offerings: The transaction builds upon PFG’s current foodservice focus within the convenience channel adding additional customers and product offerings, particularly in the fresh food space.
- Strong strategic and financial merits: The transaction is expected to be accretive to Adjusted Diluted EPS in the first full fiscal year following the close. The accretion calculation does not include any of the expected cost synergies.
- Annual run-rate net cost synergies of approximately $40 million expected to be achieved by the third full year after closing.
The transaction is expected to close in the first half of calendar 2022, subject to U.S. federal antitrust clearance, Core-Mark shareholder approval, and other customary closing conditions. The transaction is not subject to PFG shareholder approval.
Upon closing of the transaction, Core-Mark shareholders will own approximately 13% of the combined company. Core-Mark expects to continue paying its current quarterly dividend through the completion of the transaction.
BMO Capital Markets Corp. acted as the exclusive financial adviser to PFG, and J.P. Morgan Securities LLC provided a fairness opinion to the board of directors of PFG. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal counsel to PFG. Barclays acted as the exclusive financial adviser to Core-Mark. Weil, Gotshal & Manges LLP acted as legal counsel to Core-Mark.