US Foods says it is strengthening its financial position during the coronavirus pandemic with KKR’s agreement to purchase $500 million in newly issued stock in the company.
The global investment firm’s convertible stock investment carries a 7% dividend, US Foods said.
“We are pleased to see KKR return as a shareholder of US Foods as we seek to further fortify our balance sheet during the current difficult environment,” said Pietro Satriana, chairman and CEO of US Foods. “KKR will be a valuable partner for us as we continue to focus on our associates, customers, communities and shareholders as the impacts of COVID-19 unfold.
“This transaction positions us to continue to build on our strengths as the environment improves over time.”
US Foods said the 7% dividend will be payable in kind in its first year and in case or in kind, at its option, thereafter.
The stock will be convertible into shares of US Foods common stock at a conversion price of $21.50 per share. On an as-converted basis, the preferred stock will represent approximately 9.6% of pro forma common shares outstanding. In connection with this transaction, US Foods expects to appoint Nate Taylor, partner and co-head of Americas Private Equity, as a new director to its board.
KKR is funding the investment primarily through its KKR Americas XII Fund.
“We are excited to once again partner with the strong management team at US Foods,” Taylor said. “Given our history as a long-term investor in the company, we are very familiar with the sector and US Foods’ leading position, and believe the company has the capabilities and resources to navigate the current environment and create value over the long term.”
US Foods also said it expects to close its previously announced acquisition of Smart Foodservice Warehouse Stores in April.
Smart Foodservice operates 70 small-format cash and carry stores across California, Washington, Oregon, Idaho, Nevada, Utah and Montana that serve small and mid-sized restaurants and other food business customers with a broad assortment of products.
