US Foods Announces $211 Million Repurchase of Shares From Sachem Head Capital Management LP

Rhea-AI Summary

US Foods Holding Corp. (NYSE: USFD) has announced a $211 million repurchase of its common shares from Sachem Head Capital Management LP. The repurchase, at $52.28 per share, is part of the company's $1 billion share repurchase program authorized on June 1, 2024. After this transaction, approximately $691 million remains in the authorized fund.

CEO Dave Flitman expressed confidence in the company's strategy and ability to execute its long-range plan. US Foods aims to generate profitable growth, capture market share, and be more aggressive in buying back shares. Sachem Head's founder, Scott Ferguson, praised US Foods' progress and expressed confidence in its future growth.

Positive

• Repurchase of $211 million worth of shares, demonstrating confidence in company's value
• Part of a larger $1 billion share repurchase program, with $691 million still remaining
• CEO's commitment to more aggressive share buybacks, indicating potential undervaluation
• Continued support and confidence from major shareholder Sachem Head Capital Management

Negative

• Approximately $2 million spent on excise taxes for the share repurchase

Insights

Financial Analyst

US Foods' $211 million share repurchase from Sachem Head is a strategic move that signals management's confidence in the company's future. This transaction, part of a larger $1 billion buyback program, leaves $691 million available for further repurchases. The $52.28 per share price, including excise taxes, appears to be at a premium, suggesting a bullish outlook.

The aggressive buyback strategy indicates that management believes the stock is undervalued, which could potentially boost earnings per share and shareholder value. However, investors should note that while buybacks can be positive, they also reduce cash reserves that could be used for operational growth or dividends. The retention of Sachem Head as a "substantial shareholder" post-transaction suggests continued institutional confidence in US Foods' prospects.

Market Research Analyst

This share repurchase reflects US Foods' strong market position and growth potential in the competitive foodservice distribution sector. With a customer base of 250,000 restaurants and foodservice operators, the company's scale provides significant advantages. The CEO's mention of capturing market share in target customer types suggests a focused growth strategy.

The commitment to more aggressive share buybacks for the rest of the year could create a floor for the stock price, potentially attracting more investors. However, it's important to monitor how this capital allocation affects investments in technology and e-commerce solutions, which are vital for maintaining competitiveness in the evolving foodservice industry. The balance between buybacks and strategic investments will be key to long-term success.

ROSEMONT, Ill.--(BUSINESS WIRE)-- US Foods Holding Corp. (NYSE: USFD), one of America’s largest foodservice distributors, announced that it entered into a Purchase Agreement (“Purchase Agreement”) to repurchase approximately $211 million of the Company’s common shares beneficially owned by a fund managed by Sachem Head Capital Management LP (“Sachem Head”), at a purchase price of $52.28 per share and inclusive of approximately $2 million of excise taxes. The purchase of the shares is a part of the Company’s $1 billion share repurchase program authorized on June 1, 2024. The Company has approximately $691 million in remaining funds authorized.

“Today’s $211 million share repurchase reflects continued confidence in our strategy and our ability to execute our long-range plan and achieve our financial targets,” said Dave Flitman, CEO. “We remain laser-focused on improving the business to generate profitable growth and capture share in our target customer types, while executing our capital deployment priorities. Given our strong execution and confidence in our ability to deliver our 2027 financial targets, we believe our shares remain significantly undervalued. As a result, we will be more aggressive buying back our shares over the balance of this year.”

“US Foods continues to make incredible progress under Dave’s strategic leadership and his strong team,” said Scott Ferguson, Founder and Managing Partner, Sachem Head. “I am confident in their ability to grow profitability over the long term. We remain substantial shareholders of the Company and believe there is a bright future ahead for US Foods.”

About US Foods

With a promise to help its customers Make It, US Foods is one of America’s great food companies and a leading foodservice distributor, partnering with approximately 250,000 restaurants and foodservice operators to help their businesses succeed. With more than 70 broadline locations and approximately 90 cash and carry stores, US Foods and its 30,000 associates provides its customers with a broad and innovative food offering and a comprehensive suite of e-commerce, technology and business solutions. US Foods is headquartered in Rosemont, Ill. Visit www.usfoods.com to learn more.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813652487/en/

INVESTOR CONTACT:

Mike Neese

(847) 232-5894

Michael.Neese@usfoods.com

MEDIA CONTACT:

Sara Matheu

(773) 580-3775

Sara.Matheu@usfoods.com

Source: US Foods

FAQ

How much did US Foods (USFD) spend on share repurchases from Sachem Head?

US Foods spent approximately $211 million to repurchase shares from Sachem Head Capital Management LP.

What is the price per share for USFD's repurchase from Sachem Head?

The purchase price for the share repurchase was $52.28 per share.

How much is left in USFD's share repurchase program after this transaction?

After the $211 million repurchase, approximately $691 million remains in US Foods' authorized share repurchase program.

When was US Foods' (USFD) $1 billion share repurchase program authorized?

US Foods' $1 billion share repurchase program was authorized on June 1, 2024.