"Citi acknowledges the deal carries expected accretion, but the firm's concern centers on execution risk and due diligence challenges. The core problem: disproving the bear thesis could take years, which creates a persistent overhang on the stock."
"With Sysco taking on $21 billion in new debt and leverage expected to hit approximately 4.5x at closing, the balance sheet risk is real and immediate. The share repurchase program is also paused to prioritize de-leveraging, removing a key support mechanism for the stock."
"Sysco is the dominant U.S. foodservice distributor, generating $81.37 billion in revenue for fiscal year 2025. The underlying business had been building momentum heading into the announcement."
Sysco's announcement of a $29.1 billion acquisition of Jetro Restaurant Depot led to a 16.16% drop in its shares. Citi cut its price target from $88 to $72, citing execution risk and challenges in disproving the bear thesis. Sysco will take on $21 billion in new debt, increasing leverage to approximately 4.5x. Despite recent positive performance, the share repurchase program is paused to focus on de-leveraging. The combined entity could approach $100 billion in annual revenues, but analysts express concerns about the acquisition's risks.
Read at 24/7 Wall St.
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