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STELLARTON, NOVA SCOTIA and TORONTO, ONTARIO - Sobeys Inc., Canada's second largest retail grocer and distributor, announced today that it has entered into a definitive agreement to sell substantially all of the assets of its SERCA foodservice operations to SYSCO Corporation, the largest foodservice marketing and distribution company in North America. Under this definitive agreement, SYSCO will pay a purchase price of CAD $440 million (US $278 million) payable in cash on closing and will assume the liabilities associated with the purchased assets.
Sobeys and SYSCO also announced an agreement to form a strategic alliance in which the companies will work together to optimize the sourcing and procurement of produce and private label products, increase efficiency of their respective logistics and distribution systems, and develop new concepts to satisfy the changing requirements of their respective customers.
The transaction, which is expected to be completed early in calendar year 2002, is subject to SYSCO's due diligence and is also conditional upon the receipt of federal regulatory approvals, including consent from the Competition Bureau.
Bill McEwan, president and CEO of Sobeys Inc., and Richard J. Schnieders, president and chief operating officer of SYSCO Corporation, agreed the transaction and strategic alliance should create significant value for their respective customers, shareholders and employees.
"Sobeys can now focus its full attention and resources on growing its core retail business, with a strengthened financial position and a strategic association with North America's largest and best foodservice operator," said McEwan. "The sale of SERCA supports our commitment to more rapidly grow our retail food and in-store pharmacy business across Canada through the profitable development and expansion of our core Sobeys, Garden Market, IGA, IGA extra and Price Chopper banners."
"SYSCO is excited about expanding its presence in the Canadian market and we look forward to pursuing the significant mutual opportunities resulting from our association with Sobeys," Schnieders said.
McEwan also stated that the all-cash consideration will have a positive impact on Sobeys' financial position and result in a marked improvement in debt and interest coverage ratios. Sobeys will use proceeds from the transaction to reduce debt and to building sustainable worth support the company's capital spending program, which is focused on modernizing and expanding its retail food and in-store pharmacy presence across the country.