RICHMOND, Va., and WESTLAKE, Texas — Performance Food Group Co. and Core-Mark Holding Co. Inc. have entered into a definitive agreement for PFG to acquire Core-Mark in a stock and cash transaction. The transaction, approved by both boards, values Core-Mark at approximately $2.5 billion, including Core-Mark’s net debt.
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 Westlake, Texas-based 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, five Canadian provinces and two Canadian territories. It services convenience stores, grocers, drug stores, mass merchants, liquor and specialty stores and other stores that carry convenience products.
The transaction will create a convenience business within PFG’s Vistar distribution 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 based in Westlake, with distributor Eby-Brown maintaining ongoing operations in Naperville, Ill. Scott McPherson will continue in his role as president and CEO of Core-Mark. Tom Wake will continue as president and CEO of Eby-Brown, reporting to McPherson.
“This transaction brings together two companies known for their customer-focused approach and dedication to their employees,” said McPherson. “As part of our continuous focus to maximize shareholder value and better serve our customers, our board evaluated the transaction and determined this combination provides our investors immediate value and the opportunity to participate in the upside potential of being part of a larger, diversified and customer-centric supplier in the foodservice and convenience retail industry. 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.”
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.
Upon closing, Core-Mark shareholders will own approximately 13% of the combined company. At least one current Core-Mark director will be added to the PFG board. With the closing of this transaction, PFG will add approximately $17 billion of net sales, resulting in total PFG net sales of approximately $44 billion. Core-Mark expects to achieve annual run-rate net cost synergies of approximately $40 million by the third full year after closing. The transaction is not conditioned on financing, and PFG expects to fund the cash portion of the transaction with borrowing from its asset-based revolving credit facility and the issuing of new senior unsecured notes.
“Core-Mark is an outstanding company that we believe will significantly strengthen our business diversification and expansion into the convenience-store channel. Core-Mark brings a highly skilled and experienced workforce along with an experienced senior leadership team, which will be valuable additions to the PFG family of companies,” said George Holm, PFG chairman, president and CEO. “The two organizations have similar cultures, which we expect will facilitate a smooth integration and transition process. We look forward to getting to know the associates at Core-Mark better and building a strong future as one organization.”
Patrick Hagerty, executive vice president of PFG and CEO of Vistar, said, “Adding convenience-store distribution in 2019 built up the core strength of our organization, providing another important avenue for growth. Bringing Core-Mark to PFG will continue this journey and complement our existing portfolio.”
Richmond, Va.-based PFG is a foodservice distributor that has a nationwide network of more than 100 distribution facilities and suppliers across the country. It markets and delivers food and related products to more than 200,000 locations including c-stores, restaurants, schools, healthcare facilities, vending distributors, office coffee service distributors, big-box retailers, theaters and other businesses.