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An Appetizing IPO For Performance Food Group

Summary

Virginia-based Performance Food Group distributes food and food-related products throughout the United States.

The firm is set to price its IPO on Wednesday, September 20, at 9.30 am; its large underwriting team includes Barclays, Credit Suisse, Blackstone, Morgan Stanley, Wells Fargo and more.

We are excited for this high-visibility deal.

Given solid top and bottom line growth and the company's leading industry position, we see both the IPO and IPO quiet period expiration as strong potential opportunities to buy in.

Performance Food Group Inc. (Pending:PFGC) expects to raise $340.8 million in its upcoming IPO. Based in Richmond, Virginia, Performance Food Group distributes food and food-related products throughout the United States.

We previewed PFGC, along with the other five offerings this week, on our IPO Insights platform.

The company will offer 14.5 million shares at an expected price range of $22-25. If the underwriters price the IPO at the midpoint of that range, PFGC will have a market capitalization of $2.35 billion.

PFGC filed for the IPO on September 9, 2015.

Lead Underwriters: Barclays Capital and Credit Suisse Securities

Underwriters: BB&T Capital Markets, Blackstone Advisory Partners, Guggenheim Securities, Macquarie Capital, Morgan Stanley, and Wells Fargo Securities

Business Summary: Distributor of Food and Food-related Products in the United States

Performance Food Group distributes food and food-related products through its three divisions: Vistar, Foodservice and PFG Customized. The Foodservice division supplies a wide variety of consumables, including soups, appetizers, beverages, cheese and dairy products, eggs, breads, desserts, pasta, vegetables and seafood. The Vistar division focuses on candies, mints, gum, snacks, frozen foods, disposables and cleaners. The PFG Customized division offers meats, seafood, produce, dairy and small wares. Its products are sold to independent and national chain restaurants, quick-service eateries, pizzerias, theaters, schools, hotels, healthcare facilities and other institutions.

Performance Food Group is the third-largest company by revenue in the $240 billion U.S. food service distribution industry. It markets and distributes approximately 150,000 food and food-related products through 68 distribution centers to over 150,000 customers nationwide and across 41 countries worldwide.

In the fiscal year ended June 27, 2015, the company generated $15.3 billion in sales and $328.6 million in adjusted EBITDA, which represents a compound annual growth rate of 9 percent and 11 percent respectively from fiscal 2010.

Customers of PFGC include Outback Steakhouse, Cracker Barrel (CRBL), Ruby Tuesday (NYSE:RT) and T.G.I. Fridays.

Executive Management Highlights

CEO, President and Director George Holm has been in his position since 2002. He has over 30 years of experience in the food service distribution industry at companies including U.S. Foodservice and Sysco (NYSE:SYY).

CFO and SVP Bob Evans has been with Performance Food Group since May 2009. He has held senior positions at Giant Foods, Kellogg's North America (NYSE:K) and PepsiCo's (NYSE:PEP) Frito-Lay division. He holds a Masters degrees from the University of Texas at Austin and Princeton University.

Potential Competition: Sysco, U.S. Foodservice, Gordon Food Service and Others

Currently, Performance Food Group is the third-largest food distribution company in the U.S. Sysco and U.S. Foodservice hold the number one and two positions respectively. Other top competitors include Gordon Food Service, Food Services of America, Reinhart Food Services and Shamrock Foods.

Financial Highlights: Growing Top and Bottom Lines

Performance Food Group provided the following figures from its financial documents for the fiscal year ending June:

2015

2014

Revenue

$15,270,000,000

$13,685,704,000

Net Income

$56,500,000

$15,504,000

Balance Sheet Details

Assets

$3,390,900,000

Total Liabilities

$2,897,900,000

Stockholders' Equity

$493,000,000

Conclusion: PFGC A Buy

We are excited for this high-visibility deal. The third-largest firm in its industry, and with a potential post-deal valuation of well over $2 billion, PFGC will likely draw significant dollars on Wednesday.

A few risks to bear in mind: intense competition with larger peers, and the vulnerability of any food services firm to industry shocks (i.e., contamination).

We suggest requesting an allocation of PGFC from your broker; alternatively, buying in at the IPO quiet period expiration in ~25 days could be another way to take a bite of this firm for the longer term.


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