Shareholders at JP Foodservice Inc. and a larger zTC Pennsylvania company voted to merge yesterday, making the Columbia-based food distributor the second-biggest restaurant supply company in the nation.
The merged company's corporate name will remain JP Foodservice Inc., under which it will trade on the New York Stock Exchange. But its more than 40 distribution companies will assume the name US Foodservice, and their trucks will be emblazoned with a new logo.
"We want to convey to our customers that we are truly a national company that can serve them anywhere in the continental United States," said Lew Hay, JP's chief financial officer, after the company's annual meeting yesterday.
"The merger better positions us to be a winner in the industry."
JP distributes food and other products to restaurants, hotels, health care facilities, cafeterias, schools and prisons.
The new company expects no major layoffs and probably will add workers, Hay said. The headquarters will remain in Columbia.
The deal to acquire Wilkes-Barre, Pa.-based Rykoff-Sexton Inc. is valued at $1.4 billion in stock and assumed debt.
It was announced June 30.
Hay said the move will more than quadruple JP's size, increase its annual revenue to about $5.2 billion and its employment level to 12,000 employees, including about 840 in Maryland. The company will also have a customer base of 130,000 restaurants, hotels and institutional buyers.
JP also has acquired food distributors in Virginia, Nevada, Cincinnati and Connecticut this year.
"Acquisitions are a key element to our growth strategy," Hay said.
JP is not alone. The food distribution business is a rapidly consolidating industry because it has high capital needs, analysts said. Nationally, $134 billion in business is done each year.
There's a constant need to invest in equipment and technology, especially to track deliveries, said Tom Burnett, founder of Merger Insight, a New York research serv- ice that focuses on large corporate takeovers.
"You have to be larger to survive," he said. "It's more efficient and offers significant cost savings."
JP has positioned itself to be a major player by completing more acquisitions than the industry average and by taking over a company almost twice its size, Burnett said.
JP predicts annual pre-tax savings of $14 million in the first year of the merger, $20 million for the second year and $30 million for the third.
Jim Miller, JP's chairman and chief executive, will retain that position with the merged company. Rykoff-Sexton CEO Mark Van Stekelenburg will be president and vice chairman.
In the stock swap, each Rykoff-Sexton share converts to 0.775 shares of JP Foodservice, which will assume about $700 million of Rykoff-Sexton's debt.
Shares in JP Foodservice closed at $34.8125 yesterday, unchanged.
Pub Date: 12/24/97