Performance Food Group To Acquire Core-Mark In $2.5 Bln Stock, Cash Deal

Performance Food Group Co. (PFGC) announced Tuesday its agreement to acquire Core-Mark Holding Co., Inc. (CORE), a wholesale distributor to the convenience retail industry, in around $2.5 billion stock and cash transaction, including net debt.

In pre-markey activity on Nasdaq, Core-Mark shares were gaining around 9 percent to trade at $45.86.

Under the deal terms, Core-Mark shareholders will receive $23.875 per share in cash and 0.44 PFG shares for each Core-Mark share.

Performance Food expects the deal to be accretive to its adjusted earnings per share in the first full fiscal year following the close. Further, annual run-rate net cost synergies of approximately $40 million are 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.

The deal has been unanimously approved by the Board of Directors of each company. 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.

Core-Mark, a major wholesale distributor in the foodservice and convenience retail industry, generates approximately $17 billion in net sales. It employs around 7,500 people and operates 32 distribution centers across the United States and Canada. The company provides services to around 40,000 customer locations in all 50 states in the U.S., five Canadian provinces and two Canadian territories.

Performance Food expects the deal to create a major 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, Illinois.

Performance Food expects the acquisition would result in total pro-forma LTM net sales of approximately $44 billion.

Following the deal closure, Scott McPherson will continue in his role as President and Chief Executive Officer of Core-Mark, and Tom Wake will continue as President and Chief Executive Officer of Eby-Brown, reporting to McPherson.

In addition, at least one current Core-Mark director will be added to the PFG Board of Directors.

Performance Food said the acquisition is not conditioned on financing, and expects to fund the cash consideration with borrowing from its asset-based revolving credit facility and the issuance of new senior unsecured notes.

In the deal, BMO Capital Markets Corp. acted as the exclusive financial advisor to PFG, and Barclays acted as the exclusive financial advisor to Core-Mark.

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