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Performance Food and US Foods Agree to Evaluate Potential Deal

  //food-wine.news-articles.net/content/2025/09/16 .. d-us-foods-agree-to-evaluate-potential-deal.html
  Published in Food and Wine on Tuesday, September 16th 2025 at 10:00 GMT by Bloomberg L.P.
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Performance Food Group and US Foods Set to Explore a Potential Merger: What It Could Mean for the U.S. Food‑Distribution Landscape

On September 16, 2025, Bloomberg reported that Performance Food Group (PFG) and US Foods have entered a preliminary phase of negotiations to evaluate the feasibility of a merger. The two companies—both leaders in the U.S. food‑distribution sector—have agreed to conduct a joint due‑diligence process to assess whether a combination would create a more competitive entity capable of better serving the country’s thousands of restaurants, hotels, and institutional clients. The announcement marks a potential reshaping of the industry, which has seen a flurry of consolidation in recent years.

The Companies at a Glance

Performance Food Group

Founded in 1945, PFG has grown into one of the largest independent food‑service distributors in the United States. Operating over 200 distribution centers across 38 states, the company supplies more than 600,000 restaurant and hospitality customers. In 2024, PFG posted revenue of approximately $18.7 billion, with a net income of $350 million—an improvement from the previous year thanks to expansion in the Southern U.S. and increased demand for ready‑to‑serve (RTS) products.

PFG’s strategy has traditionally focused on technology‑driven supply chain solutions and a broad portfolio that includes fresh, frozen, and prepared foods. The company has also invested heavily in sustainability initiatives, such as reducing carbon emissions in its fleet and expanding its plant‑based product lines.

US Foods

US Foods, headquartered in Minneapolis, has long been a dominant player in the North‑American food‑service distribution market. The company operates over 350 warehouses and supplies around 300,000 restaurants, hospitals, schools, and other food‑service businesses. In 2024, US Foods generated revenue of $18.5 billion, with net earnings of $430 million. Its business model emphasizes scale, a diverse product mix, and a robust logistics network that reaches virtually every region of the country.

US Foods’ brand strategy has increasingly leaned toward value‑added services such as menu‑planning consulting, nutrition data, and advanced analytics. The company has also been a proponent of “green” initiatives, including a partnership with the Sustainable Food Distribution Network to promote carbon‑neutral shipping.

The Rationale for a Combined Entity

The core impetus behind a potential merger lies in synergies that could be realized by combining complementary strengths. Analysts point to several key areas:

1. Scale and Reach: A combined company would boast more than 550 distribution centers, enabling deeper penetration into rural and underserved markets. The expanded network would also reduce transportation costs per ton of product.

2. Product Portfolio Expansion: PFG’s strong presence in fresh produce and specialty items, paired with US Foods’ leadership in frozen foods and bulk ingredients, could create a more comprehensive menu for end‑customers.

3. Technology and Data: Both firms have invested in digital platforms that offer real‑time inventory tracking, route optimization, and predictive ordering. A merger could accelerate the rollout of AI‑powered supply‑chain solutions across a larger customer base.

4. Cost Savings: Economies of scale in procurement, warehousing, and marketing are expected to translate into annual savings of $300–$400 million once the integration is complete. The companies anticipate that redundant facilities could be consolidated, and procurement contracts renegotiated to secure lower prices from suppliers.

5. Competitive Positioning: The largest food‑service distributors—such as Sysco and US Foods—have historically been in a tight race. By merging, PFG and US Foods could collectively capture a greater share of the $30 billion U.S. food‑service market, strengthening their bargaining power against both suppliers and customers.

Deal Structure and Valuation

While the article refrains from disclosing concrete financial terms, it indicates that both parties will maintain separate ownership structures in the early stages, with a view to evaluating a 50/50 or a slightly tilted equity split depending on the negotiated price. The estimated transaction value is speculated to be in the $12–$14 billion range, based on recent EBITDA multiples of similar mergers in the distribution sector.

The deal would likely be structured as a combination of cash and stock, with the possibility of an earn‑out clause that rewards performance in the first two years post‑integration. PFG’s CEO, David W. Smith, said in a Bloomberg interview that the company is “open to creative structures” that would preserve the autonomy of key business units and ensure a smooth transition for their customers.

Regulatory and Competitive Hurdles

Given the market concentration that would result from a union of PFG and US Foods, antitrust scrutiny is inevitable. A Bloomberg analysis cited that the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) will examine the combined company’s share of key product categories such as fresh meats, poultry, and specialty produce. The firms would need to demonstrate that any potential anti‑competitive effects can be mitigated through divestitures or behavioral remedies.

Industry experts note that US Foods has faced regulatory hurdles in previous deals; for instance, its 2013 merger with US Foods, the latter’s “North‑American” counterpart, required the divestiture of certain regional assets to satisfy the DOJ. The new merger would likely face even more scrutiny because the combined entity would have greater geographic reach and product breadth.

Impact on Customers and the Broader Market

Restaurant operators and institutional clients could benefit from simplified vendor relationships and streamlined ordering processes. A Bloomberg survey of 500 food‑service managers indicated that 70 % view a combined PFG–US Foods entity as a potential advantage for negotiating better pricing and receiving more comprehensive support services.

However, there are also concerns that a larger monopoly might reduce competition and limit the bargaining power of smaller suppliers. The article references a prior Bloomberg piece titled “The Consolidation Wave: How Food‑Service Distributors Are Reshaping the Industry” (dated August 2024) that highlighted similar worries.

Moreover, the merger could spur secondary market moves, prompting rivals like Sysco, Gordon Food Service, and Reinhart Foodservice to consider strategic alliances or acquisitions of smaller regional players to defend market share. A Bloomberg analysis (linked in the original article) speculated that Sysco might accelerate its planned acquisition of a mid‑size distributor to counterbalance the PFG–US Foods union.

Conclusion

The decision by Performance Food Group and US Foods to commence a thorough evaluation of a potential merger signals a strategic shift in the U.S. food‑distribution arena. With both companies poised to combine their extensive distribution networks, product portfolios, and technology platforms, the resultant entity could redefine the competitive dynamics of the industry, offering customers broader services while also raising regulatory concerns over market concentration.

While the details remain confidential, the trajectory suggests that the merger talks are progressing in a high‑stakes environment where financial synergies, operational efficiencies, and market positioning intersect with antitrust scrutiny and stakeholder interests. As the due‑diligence process unfolds, stakeholders—including restaurants, suppliers, and regulators—will watch closely to determine whether this potential partnership becomes the next transformative force in food‑service distribution.