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Performance Food to buy Reinhart for $2 billion

Food distributor Performance Food Group Co. has agreed to acquire privately held rival Reinhart Foodservice for $2 billion in a bid to build scale and tackle rising costs.

Reinhart will be acquired from its owner Reyes Holdings LLC in an all cash deal, Performance Chief Executive George Holm confirmed in an interview.

Reinhart generated more than $6 billion in revenue last year. Combined, the companies would have more than $30 billion in sales, according to Performance, which has a market value of $4.2 billion.

Food distributors — the companies that get products from manufacturers to restaurants, retailers and other outlets — have faced higher costs that have pressured profits in a relatively low-margin and fragmented industry.

Those costs include higher pay for truck drivers and logistics workers in a tight labor market.

Performance’s operating expenses jumped more than 9% in its latest quarter partly because of higher personnel costs, the Richmond, Va.,-based company said in May. Operating profit slipped about 2% in the quarter compared with the year earlier to $59.2 million.

Mr. Holm said he doesn’t plan to close any of Reinhart’s 26 distribution centers. Instead, he said Performance wants to use those facilities alongside its own 80 or so centers to more efficiently serve customers across the country.

“One of the biggest advantages this will do for us is it will reduce the number of miles we drive,” he said.

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