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Law360 (April 21, 2020, 3:26 PM EDT ) Cravath-led US Foods said Tuesday that Simpson Thacher-represented private equity giant KKR has agreed to a $500 million investment in the food distributor that comes amid the ongoing COVID-19 crisis.
Rosemont, Illinois-based US Foods Holding Corp. said affiliates of investment giant KKR & Co. LP have agreed to buy shares of newly issued convertible preferred stock, which carries a 7% dividend. The investment comes as the company works to strengthen its balance sheet during the fallout from the COVID-19 pandemic, US Foods Chairman and CEO Pietro Satriano said in a statement.
Like many companies over the last few months, US Foods' shares have taken a hit as the stock market and economy react to the novel coronavirus pandemic. Shares of the company have more than halved since Feb. 14, falling from a high of $40.50 per share to just $17.34 apiece Monday.
"KKR will be a valuable partner for us as we continue to focus on our associates, customers, communities and shareholders as the impacts of COVID-19 unfold," Satriano said in the statement. "This transaction positions us to continue to build on our strengths as the environment improves over time," he said.
Given KKR's status as a long-term investor with US Foods, the firm is confident the company can navigate the current environment, Nate Taylor, partner and co-head of the firm's Americas private equity group said in the same statement. As part of the investment, Taylor is also being appointed to US Foods' board of directors.
"We are excited to once again partner with the strong management team at US Foods," he said.
The preferred shares can be converted to common stock at a price of $21.50 each. If converted, they would represent 9.6% of the company's outstanding common shares, US Foods said.
In the announcement Tuesday, US Foods also said that on Friday it will close its previously announced $970 million acquisition of cash-and-carry business Smart Foodservice from Apollo Global Management.
Smart Foodservice Warehouse Stores is based in Oregon and operates 70 such stores in the western U.S., according to its website.
A spokesperson for US Foods declined to comment beyond its public statements, and a representative for KKR did not immediately respond to requests for comment.
US Foods was represented by a Cravath Swaine & Moore LLP team including Robert I. Townsend III, Keith Hallam, Jenny Hochenberg and Andrew J. Pitts. Its financial advisers are Centerview Partners LLC and Evercore Inc.
KKR was represented by a Simpson Thacher & Bartlett LLP team including Marni J. Lerner, Johanna Mayer, Nina Bakhtina, Joseph H. Kaufman, Katharine P. Moir, Joseph A. Tootle, Jonathan Lindabury and Mimi C. Cheng.
--Additional reporting by Elise Hansen. Editing by Orlando Lorenzo.
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