Chairman & Chief Executive Officer, PERFORMANCE FOOD GROUP CO
George Holm discusses IPO of Performance Food Group on CNBC
About George Holm
George Holm, Chairman and CEO of Performance Food Group, discussed the company's initial public offering on CNBC on September 17, 2016. He stated that the decision to proceed with the IPO occurred during a period of market volatility, noting that the company's investors were not selling their shares and that the offering consisted entirely of primary shares. The stock priced at $19 per share, below the expected range of $22 to $25. Holm said the company was using the proceeds to pay down debt and that its investors were "feeling good." Holm addressed the blocked merger between Sysco and US Foods, calling it "disappointing" and noting that Performance Food Group would have been a beneficiary of divestitures from that deal. He said the company planned to continue making acquisitions, having completed 13 since its own acquisition of PFG, and that it would pursue "a lot more smaller deals." Regarding the exit timeline for the company's private equity owners, Holm said they would likely conduct a secondary offering after the lockup period and exit within a year to 18 months. On industry conditions, Holm described a period of food price deflation and said that improving employment and the growth of two-income families were positive factors for the foodservice industry.
Transcript (25 segments)
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Interviewer0:01
Celebrating its IPO today here at the New York Stock Exchange, the number three food service distributor in the country, Performance Food Group. The stock under ticker PFGC is now trading as you can see at $19.31. It priced at $19, that was below the expected range of $22 to $25. Joining us now, George Holm, the CEO of the company. Good morning, how are you doing? Just get an idea of the scale here. It says in the notes you distribute the equivalent of two weeks of the total annual consumption of beef, poultry, and pork in this country. So you're big, third biggest, a little over $15 billion in revenues, about 12,000 employees, and 68 distribution centers. You're a Blackstone company, and obviously we are, as our primary owner. We also have Wellspring, a smaller private equity firm also in our. What stands out here is that obviously we've had a huge amount of market volatility. A lot of IPOs have been canceled. We know there are a lot that are waiting in the wings, and you're one of the first big IPOs to come to market. Can you talk us through that decision to pull the trigger in what are clearly quite difficult circumstances in general for the markets?
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George Holm1:12
Yeah, a tough time to do it. Our investors weren't selling any of their shares, so they were doing all primary shares, and just no reason not to go through. Never a good time, right?
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Interviewer1:30
But it clearly has cost you. If you came through with an expected price range of $22 to $25 a share, that's correct, priced at $19. There's a material impact from the decision that you made, perhaps. I don't know, do you feel there is?
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George Holm1:44
Well, we're using the proceeds to pay down debt, so we just don't pay down as much debt as we expected. And we're happy. I mean, our investors are feeling good, so I feel good.
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Interviewer1:55
Of course. You now have a currency, and I mentioned that because in your area, number one and number two tried to get together and the FTC said no, and they prevailed. US Foods and Sysco dropping their plan to merge. What about your ability to continue to consolidate this industry? Do you expect that you will make deals now that you do have a currency, namely a new stock price that you could use to do it if you chose to?
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George Holm2:18
Yes, we not only have that, but we have a much improved balance sheet. You're using the proceeds to pay down debt, and we've made 13 acquisitions since the acquisition of PFG, and we want to continue.
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Interviewer2:31
Would have been a beneficiary potentially though if that deal had been allowed to go through, right? They were going to divest a lot of stuff to your very company, right?
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George Holm2:38
That was disappointing, yes.
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Interviewer2:41
And so what does it mean now? You got to just do a lot more smaller deals than doing that big one?
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George Holm2:44
That's correct.
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Interviewer2:46
But you expect you will?
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George Holm2:47
We expect to, yes.
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Interviewer2:49
And what about the owners? When do they exit?
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George Holm2:52
That'll certainly be their decision.
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Interviewer2:55
They told you? Is it in the paperwork?
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George Holm2:58
You know, they'll do a secondary sometime after the lockup period is done. And I think as long as we're trading well and continue to improve, it'll be successful, and they'll probably get out a year, 18 months, something like that.
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Interviewer3:15
We have a lot of casual dining customers. We sure do. We've seen the split between the protein-based companies and non-protein seems to be getting wider. Steak is huge. I just wonder if you see consumer taste change anytime soon or in what direction it's going.
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George Holm3:33
Well, I think people are getting a little more adventurous with what they eat, but it's still the comfort foods that are the big sellers. And we are very large in beef. It's a big part of our business, and it just continues to grow. I mean, people still eat beef.
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Interviewer3:48
Got Duncan today blaming egg prices among other things for their weak comps. Stocks down 11%. Are you expecting more of those big disruptions in supply and price?
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George Holm3:58
We're actually going through a period of deflation right now, so probably not. The egg, I think that's a kind of a one-off, difficult for everybody, us included. But today, food pricing is actually very soft.
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Interviewer4:13
In an environment where structurally you think more people will be eating away from home, I mean the outlook is bright as far as your concern for the industry?
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George Holm4:20
Well, you know, the consumer is doing better, employment is getting better. What's particularly good for us is the two-income family. That's when eating out kind of goes from being discretionary to being a necessity. So we have a great outlook right now.
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Interviewer4:36
Good to meet you, George.
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George Holm4:37
You too. Thank you for your time.
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Interviewer4:39
George Holm, the IPO of Performance Food Group Company. Thanks. When we come back, awaiting some sales numbers from Toyota and more importantly Volkswagen. We've already gotten Audi, which has a surprising number. We'll get to that after the short break.