Sysco (NYSE:SYY) shares fell 1.3% to $82.49 in premarket trading on Tuesday after the foodservice distributor priced a $1 billion common stock offering to help finance its planned acquisition of Jetro Restaurant Depot.
The company priced 12,345,679 shares at $81 each, representing a discount of approximately 3% to Monday’s closing price of $83.54. The offering is expected to close on September 16.
Issuing the additional shares will increase Sysco’s outstanding share count, resulting in dilution for existing shareholders.
Offering Supports Jetro Restaurant Depot Acquisition
Proceeds from the equity offering are intended to partially fund Sysco’s pending $29.1 billion acquisition of Jetro Restaurant Depot.
The transaction is also expected to be financed with approximately $21 billion of new and hybrid debt, according to the supplied information.
The acquisition would expand Sysco’s presence in the cash-and-carry foodservice distribution market.
Sysco Pauses Share Repurchases
Sysco has also paused its share repurchase programme as it prioritises reducing leverage following completion of the acquisition.
The company is targeting a reduction in leverage of at least 1.0x during the first 24 months after the transaction closes.
The suspension means capital that might otherwise have been allocated to share repurchases will instead be directed towards debt reduction.
Sysco’s premarket decline came alongside broader weakness in US equity futures, with the S&P 500 down 0.3%, the Dow Jones lower by 0.5% and the Nasdaq declining 0.3%.
Sysco Corporation stock price
