Tomahawk, WI 12/10/2013 (BasicsMedia) – SYSCO Corporation (NYSE:SYY) is a $21.80 market capped company involved in the distribution of food and related products and services. The company this week announced that it is acquiring U.S. Foods for at a cost of $3.5 billion.

This transaction involves cash and common stock. For cash, SYY will pay $500 million and pay $3 billion in common stock. However, the total enterprise value for this transaction is $8.2 billion because SYY will assume debt amounting to $4.7 billion.

Investors have welcomed this move as can be seen in the manner in which the stock is traded. A lot of investment believers in this deal expect the acquisition to accretive immediately to earnings.

The concern in this deal is about the $4.7 billion debt. While SYSCO Corporation (NYSE:SYY) itself has reasonable debt level by most measure at the time of the acquisition, dealing with new debt could impact on its earnings in the near-term until things are adjusted. This means that near-term investors may not have the best time in this stock as it is set to go through corrections before things can peak up again. However, longs can bet in SYY stock as 12 – 24 months will be enough to set things in order for profitability going forward.

There are reasonable grounds to believe that SYSCO Corporation (NYSE:SYY) will soon be able to convert this acquisition into mainstream revenue earner. Moreover, there are even better reasons that longs will enjoy their holding of this stock once things adjust. It can be seen that since Dec. 2008, SYY has increased its quarterly dividend five times. This means increase of about 5.2 percent every year. The company’s forward yield at 3.38 percent is also very attractive for investors.

As for earnings, SYSCO Corporation (NYSE:SYY) recently reported earnings and revenue which exceeded estimates at 49 cents per share on $11.7 billion, beating estimates by 2 cents for earnings per share and $80 million on revenue. It thus makes perfect investment sense to buying into the latest acquisition by the stock.

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