Sachem Head Urges Performance Food Group to Explore Merger with US Foods

Activist Investor Sachem Head Pushes for Performance Food Group to Consider US Foods Merger

Performance Food Group (PFGC), a leading North American foodservice distributor valued at $16.34 billion, is under pressure from activist investor Sachem Head Capital Management to evaluate a potential merger with US Foods. Sachem Head, holding approximately 2-4% of PFG’s shares, has also nominated four candidates to PFG’s board ahead of the 2025 Annual Meeting to drive this agenda.

Company Profile and Market Position

Performance Food Group operates through three segments: foodservice, specialty, and convenience distribution. Its core foodservice segment generates nearly 62% of EBITDA, distributing a wide range of national and proprietary food products to restaurants and institutions nationwide. The company serves over 300,000 customer locations through approximately 144 distribution centers. Despite its scale, PFG ranks third behind Sysco and US Foods, collectively controlling about 38% of the North American market.

Activist Strategy and Board Nominations

Scott D. Ferguson, founder and managing partner of Sachem Head, along with David A. Toy, R. Chris Kreidler (former Sysco CFO), and Karen M. King (McDonald’s executive and Aramark board member), comprise the slate nominated to PFG’s board. Ferguson and Toy bring experience from successful activism at US Foods, where they helped install new leadership and catalyzed a turnaround that doubled the stock price since Sachem Head’s involvement.

Merger Rationale and Synergy Potential

Sachem Head’s primary push is for PFG to explore a business combination with US Foods. The rationale centers on substantial cost-saving synergies through purchasing power, logistics, and warehouse consolidation. Historical context includes Sysco’s failed 2013 attempt to merge with US Foods, which projected annual synergies exceeding $600 million, equivalent to over 70% of US Foods’ EBITDA at the time.

Applying similar logic to a potential US Foods–PFG merger, with PFG’s foodservice segment EBITDA at $1.2 billion, projected annual synergies could range from $800 million to over $1 billion. Kreidler’s experience as Sysco’s CFO during the prior merger attempt lends credibility to these estimates.

Regulatory and Strategic Considerations

Unlike the blocked Sysco-US Foods deal, which involved the top two industry players, a US Foods-PFG merger would combine the second and third largest distributors. PFG’s limited presence on the West Coast reduces direct national overlap. Additionally, the current regulatory environment is perceived as more favorable compared to the Obama-era scrutiny that stalled the earlier deal.

Nonetheless, any merger would likely require divestitures and remains subject to antitrust review. Sachem Head emphasizes that the board should at least evaluate this strategic option given its potential shareholder value.

Board Dynamics and Proxy Fight Prospects

US Foods reportedly approached PFG about a potential combination in July 2025, but PFG has not engaged meaningfully. Sachem Head’s nomination of a strong, experienced director slate signals readiness to press for change through a proxy contest if necessary. PFG’s shareholder base includes alternative asset managers potentially sympathetic to activist-driven strategic reevaluation.

Additionally, a CEO transition appears imminent, with longtime CEO George Holm expected to step down and President Scott E. McPherson likely to succeed him. This leadership change could provide a timely window for strategic transactions, despite potential internal challenges.

Outlook and Possible Outcomes

Sachem Head is not demanding an outright sale but advocating for a thorough exploration of a merger that could deliver significant long-term value to shareholders through stock-based consideration. A plausible settlement might involve adding two to three activist-nominated directors and forming a committee to evaluate strategic alternatives, including a merger.

If a merger is deemed unfeasible, the activist nominees could still help improve margins and operational performance. Overall, PFG remains a strong business with room for cost and margin enhancements.

Ken Squire, founder of 13D Monitor, notes that Performance Food Group is held in his activist-focused mutual fund, underscoring the company’s relevance in shareholder activism.