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Shares in food distributor Sysco (SYY) soured over 12% today after it paused a share buyback scheme to help fork out $29 billion to buy catering supplier Jetro Restaurant.
Debt-Hungry Deal
Investors turned their noses up at the deal after Sysco said it would be financing it with $21 billion in new and hybrid debt, alongside $1 billion in cash and equity.
Restaurant Depot shareholders will receive $21.6 billion in cash and 91.5 million Sysco shares, giving them a roughly 16% stake in the combined company, the companies said.
Jetro Restaurant Depot operates a wholesale cash‑and‑carry model, under which customers pay upfront for goods such as food, beverages and takeaway containers, which should complement Sysco’s delivery network serving restaurants, hospitals and hotels. Jetro has about 166 warehouse locations across 35 U.S. states that serve more than 725,000 independent restaurants and foodservice operators.
However, Sysco’s decision to pause its share repurchase program left a bad taste in shareholders ‘ mouths. It said the pause was needed to “prioritize rapid de-leveraging following the acquisition.”
Cash & Carry Demand
The Cash & Carry channel is a $60-70 billion addressable market and is the primary source of supply for many smaller independent restaurants and foodservice operators, providing them everyday low prices, seven days a week. That could prove particularly valuable if food prices rise as a result of the Iran war.
Sysco said it expects the acquisition to boost earnings per share by a mid‑ to high‑single‑digit percentage in the first year after closing, which it expects by the third quarter of fiscal 2027.
“Sysco and Jetro Restaurant Depot will enhance value for small independent restaurants and the consumers they serve by expanding access to more affordable, fresh food products and delivering more choice and convenience,” Sysco CEO Kevin Hourican said in a statement, highlighting how the combination would help lower prices for more customers.
The combined company generated 2025 annual net revenues of nearly $100 billion, approximately $6.4 billion of adjusted EBITDA, and $5.5 billion of free cash flow, increasing Sysco’s revenue by approximately 20%, EBITDA by approximately 45%, and free cash flow by approximately 55%.
Is SYY a Good Stock to Buy Now?
On TipRanks, SYY has a Moderate Buy consensus based on 8 Buy and 5 Hold ratings. Its highest price target is $102. SYY stock’s consensus price target is $92.09, implying a 27.27% upside.
