The decision to make the approach public is an unusual move that could put pressure on Performance Food to engage in talks. (Luke Sharrett/Bloomberg)
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US Foods Holding Corp. approached Performance Food Group Co. to explore the merits of a combination, and its invitation was declined, according to US Foods CEO Dave Flitman.
“We believe that a combination with PFG has the potential to create significant value for both companies and our collective stakeholders, while enhancing competition in the food-service industry,” Flitman said on a conference call Aug. 7 discussing US Foods’ quarterly results. “Our ask of PFG is to simply work together to further understand the merits and opportunities of a potential combination.”
The decision to make the approach public is an unusual move that could put pressure on Performance Food to engage in talks.
The comments confirm a Bloomberg News report last month that US Foods expressed interest to Performance Food about a potential combination that would create a food distribution company with combined sales of about $100 billion.
Performance Food ranks No. 4 and US Foods ranks No. 5 on the Transport Topics Top 100 list of the largest private carriers in North America. US Foods ranks No. 2 and Performance Food ranks No. 3 on the top food service carriers list.
US Foods fell as much as 9.3% for its biggest intraday drop since March 2022. The shares were down 7.6% to $78.26 at 1:16 p.m. in New York, giving the company a market value of $18 billion. Performance Food, which briefly gained as much as 2.5%, fell 0.9% to $97.44, giving it a market value of $15 billion.
A spokesperson for Richmond, Va.-based Performance Food declined to comment.
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Flitman on the call listed merits of a potential combination including “economies of scale,” operational efficiencies, expanded growth prospects and complementary geographic reach.
The combined company would become the No. 1 U.S. food-service distributor, with 18% of the $371 billion market, according to Bloomberg Intelligence. That would surpass current market leader Sysco Corp., which has a 17% share, senior industry analyst Michael Halen wrote in a research note.
Performance Food has a strong footprint in independent pizzerias, convenience stores and candy and snacks — all areas where US Foods is underexposed, he said. A deal would create “meaningful scale and synergies,” though it would hurt US Foods’ EBITDA margins, according to Halen.
US Foods supplies restaurants, hospitals, schools and hotels, generating revenue of $37.9 billion last year. Rosemont, Ill.-based US Foods employs about 30,000 people in more than 70 locations, according to its website.
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