Performance Food Group Co. (PFG) has entered into a definitive agreement to acquire Cheney Brothers, a prominent foodservice distributor headquartered in Riviera Beach, Florida, in a transaction valued at $2.1bn. The acquisition, which will be financed through a mix of PFG’s Asset-Based Loan (ABL) facility and newly issued Senior Unsecured Notes, represents a significant expansion of PFG’s presence in the Southeastern U.S., a region characterized by intense competition among industry heavyweights.
Cheney Brothers, a family-owned business with a century-long history, has grown into a formidable player in the food-service distribution sector, managing over 1.5m square feet of distribution space and a vast inventory of more than 65,000 SKUs. With annual revenue of approximately $3.2bn, Cheney Brothers has established a strong market foothold, which PFG plans to leverage to solidify its own market position.
The acquisition is expected to close in 2025, pending regulatory approvals, and will integrate five of Cheney Brother's state-of-the-art distribution facilities into PFG's operations. This integration is expected to enhance PFG's ability to serve key markets in Florida, Georgia, North Carolina and South Carolina, regions where the company faces stiff competition from rivals such as Sysco Corp and US Foods Holding Corp. The addition of these facilities is also anticipated to provide PFG with excess capacity, positioning the company for future growth in the region.
PFG's strategic rationale for the acquisition is clear: By absorbing Cheney Brothers' established distribution network and customer base, PFG aims to booster its competitive edge in a highly contested market. The company projects approximately $50m in annual run-rate synergies within the first three fiscal years following the transaction's close. These synergies are expected to be realized through enhanced procurement practices, streamlined operations, and optimized logistics. Cheney Brothers’ EBITDA margin was significant, contributing to the attraction of the deal. With the anticipated synergies, the effective purchase price multiple is expected to reduce from 13x to approximately 9.9x Cheney Brothers’ trailing twelve-month Adjusted EBITDA, reflecting a sound valuation.
Despite the financial upside, the acquisition adds to PFG's debt burden, a factor that has drawn scrutiny from analysts. The financing of the deal through additional borrowing raises concerns about PFG’s leverage ratios and the potential strain on its capital structure. However, PFG’s management remains optimistic, arguing that the strong cash flows generated by Cheney Brothers, coupled with the expected synergies, will support the company’s ability to manage its debt load effectively.
In a sector where competition is fierce, Performance Food Group’s acquisition of Cheney Brothers represents a significant gamble to fortify its presence in the Southeastern U.S. market. By folding Cheney Brothers’ established operations into its own, PFG is not just expanding its footprint but also sharpening its edge against industry giants. This deal aligns with PFG’s broader strategy of growth through targeted acquisitions, aimed at boosting shareholder value over the long term. As the deal unfolds, industry observers will be closely monitoring PFG's ability to manage its heightened debt load while delivering on the expected synergies that could potentially cement its prevailing position in the market.
Written by: Lewis Nguyen
Sources: Business Wire, Street Insider, The Business Journals, Mergerlinks
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