Rykoff-Sexton and US Foodservice Merge
By the early 1990s, Rykoff-Sexton had successfully merged the two separate operating companies and was labeling the majority of the products under the Rykoff-Sexton Banner. The result was better operating efficiencies, economies of scale and recognizable brand name. In 1995, Rykoff-Sexton relocated the headquarters from Los Angeles, CA to Lisle, IL. Rykoff-Sexton was generating $1.6 billion in annual sales, which represented a 7% annual revenue growth rate since 1984.
By the mid-1990s, the restaurant industry had further evolved into a chain system where consistent, ready to assemble food products were demanded. Large national restaurant chains wanted to deal with one large national food distributor that could provide food products to their exact specifications as well as be able to deliver them every week. Rykoff-Sexton's management had decided that the best strategy was to strategically purchase other broad line grocers and grow revenue. During the mid-1990s, Rykoff-Sexton purchased Continental Foods of Baltimore, MD for an undisclosed price and H&O Foods of Las Vegas, NV for $5.5 million in cash and assumption of $26.6 million in debt.
In February 1996, Rykoff-Sexton and US Foodservice of Wiles-Barre, PA announced their intent to merge. The merger was unanimously approved by the boards of directors of both companies. In 1996, US Foodservice was generating $1.5 billion in revenue and Rykoff-Sexton was generating $2 billion. The merger would combine the third and fourth largest U.S. broadline foodservice distributors with combined annual sales of approximately $3.5 billion. The 8.8 million shares of US Foodservice were exchanged for $270 million in Rykoff-Sexton stock. The $350 million in US Foodservice debt was assumed by Rykoff-Sexton. Rykoff-Sexton (RYK) funded the purchase by issuing 14.3 million new shares at $25 per share.
In September 1996, the newly merged Rykoff-Sexton/US Foodservice announce that corporate head quarters will be relocated to Wilkes-Barre, PA from Lisle, IL.
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