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US Foods plans to raise $1bn in initial public offering to clear debt

FBR Staff Writer Published 16 May 2016

US Foods is planning to raise $1bn in a planned stock market listing and wants to use the proceeds to trim its debt.

The company has set the price range of the initial public offer (IPO) between $21 and $24 per share. If all the shares are sold at the high end of the range, the company could raise more than $1.2bn.

Through the IPO, US Foods plans to sell 44.4 million shares of its common stock, along with 6.7 million shares in an over-allotment option.

The company is planning to use the funds received from the public issue to clear its $932m debt and use the remaining amount for corporate purposes.

In June 2015, Sysco had cancelled its planned acquisition of US Foods after a federal court ruled against the deal. It had been working on the acquisition for more than a year.

The acquisition would have increased Sysco's annual sales by $20bn, with the combined entity earning a market share of around 25%. Sysco also needed to pay US Foods $300m as breakup fee for the termination of the deal, reported The Wall Street Journal.

Sysco also spent an additional amount of $380m in other deal-related expenses such as litigation fees, debt costs and planning expenses, undercurrentnews.com reported.

Performance Food Group paid US Foods $12.5m as it had agreed to buy 11 US Foods facilities if the merger had won approval.