Sysco (SYY) to Bolster Portfolio With the Buyout of J. Kings

Sysco Corporation SYY announced the buyout of J. Kings Food Service Professionals. The news followed a few hours after the company released fourth-quarter fiscal 2019 results on Aug 12. The parties have signed a definitive agreement pertaining to the deal. However, terms of the transaction have not been disclosed.  

Acquisitions are a Key Growth Catalyst

J. Kings Food Service Professionals is a broadline distributor based in New York. It also offers services to customers located in Connecticut and New Jersey. While J. Kings’ primary customers are independent restaurant operators, it also caters to retail, institutional and multi-unit customers. The company generates annual sales of nearly $150 million. Sysco’s sturdy business scale and resources combined with J. Kings’ solid local presence is likely to strengthen their respective businesses. The buyout will enable the companies to meet customers’ needs more efficiently.

With respect to Sysco, buyouts have always been an integral part of the company’s growth strategies. Such efforts have enabled the company to grow its distribution network, expand customer base and enhance long-term prospects. Prior to this, it acquired sister firms J & M Wholesale Meats and Imperio Foods. It also announced a deal to acquire Waugh Foods, a Central Illinois-based distributor.

Some of the other noteworthy acquisitions of the company include HFM in Hawaii, Doerle Food Service in Louisiana and Kent Frozen Foods in the U.K. Also, the company inked an agreement in Sweden and bought the remaining 50% stake in Mayca Distribuidores of Costa Rica. The takeovers of Supplies on the Fly, North Star Seafood, Gilchrist & Soames and 50% stake in Mexico-based Pacific Star Foodservice are noteworthy.

Well, such moves have augmented Sysco’s portfolio and provided it revenue-generating opportunities. In fact, acquisitions of numerous small distributors in the United States and Europe contributed significantly to revenues in fiscal 2019.

Apart from strategic mergers, the company resorts to innovations and revitalization of brands to bolster business. It also undertakes efforts to enhance digital shopping capabilities, induce supply chain efficiencies and manage costs effectively.

Going ahead, we believe that such efforts will continue to boost investors’ optimism in this Zacks Rank #3 (Hold) company. The stock has gained 8.5% in the past six months compared with the industry’s rise of 3.4%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Kimberly-Clark KMB, with an expected long-term earnings growth rate of 5.5%, also carries a Zacks Rank #2.

Estee Lauder EL, with a Zacks Rank #2, has long-term earnings growth rate of 13%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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