Looks Like M&A Week in 3 Different Sectors

In this episode of Motley Fool Money, Motley Fool contributors Tyler Crowe, Matt Frankel, and Lou Whiteman discuss: - Sysco’s $26 billion deal for Restaurant Depot. - McCormick’s $44 billion deal for Unilever’s food division. - The track record of major consumer brand mergers. - Eli Lilly acquiring Centessa Pharmaceuticals. - Listener question: Thoughts on Whirlpool? To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue » A full transcript is below. Where to invest $1,000 right now When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 928% — a market-crushing outperformance compared to 186% for the S&P 500. They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor. Stock Advisor returns as of April 8, 2026. This podcast was recorded on March 31, 2026. Tyler Crowe: It is merger mania this week. Welcome to Motley Fool Money. I'm Tyler Crowe, and today I'm joined by longtime Fool contributors, Matt Frankel and Lou Whiteman, with three of us being part of the Hidden Gems team here at Motley Fool. As we said, there has been a lot of movement in the merger and acquisition field in the past couple of days, and we're going to try to break down as many of those deals as we can. Also, we're going to get to some listener questions. But to start, let's go with a lot of the deals that's going on in the food industry because we had two doozies. There must have been like, a lot of lawyers and investment bankers putting in extra hours this past weekend because first, we got news on Monday that Sysco, the food distributor, not the networking hardware company. Was acquiring private retailer Restaurant Depot for $26 billion. We'll get into the details in a second here. But I think that was going to be the headline deal we were going to talk about. Then this morning, we had even bigger deal where McCormick basically said, "Hold my beer" because they decided to merge with Unilever's food division in a $44 billion deal. What makes it kind of striking is that McCormick itself is a $14 billion company, and Sysco as doing a $26 billion deal was a $30 billion company. These are massive transformative changes in pretty sleepy consumer brand food distribution businesses. Now, personally, as I looked at the initial deals, I was a little dubious. But if forced to choose, I would probably say the Sysco Deal looks a little bit better. But I wanted to turn to you guys and see what you guys thought of both of these. I'm going to start with you, Matt. Are either of these deals making Sysco or McCormick more attractive? Matt Frankel: I'd agree that the Sysco Deal is the more interesting of the two to me. If you're not familiar, so Sysco is the largest food service distributor in the United States. I had a short career in the restaurant industry many years ago, and I worked at a total of four restaurants across two states, and Sysco is the primary food supplier for all of them, and that's among the other 700,000 restaurants it serves worldwide. It is a massive distribution network. It gives it a major efficiency advantage over its competitors. On the other hand, Restaurant Depot, it's a network of in person wholesale restaurant supply warehouses. Think of it as like a Costco or a Sam's club, but specifically for restaurants. It's carved out a very nice niche among restaurant owners who value flexibility and pricing, over the convenience of the national distributor Sysco. Lou Whiteman: Now, as Matt says, Restaurant Depot is a much different business, arguably a better business, better margins, decent cash flow. It better be because Sysco's paying a price that's higher than Sysco's multiple. They are hoping to see their business improve because of Restaurant Depot. Real question for me is, can they get this done? Last time Sysco tried something like this with US Foods, anti trust got in the way. It's a decade later, and as I said, they are different businesses, but we'll see if it plays out. Tyler, I do have to say, though. You said interesting. To me, back when I was in deal making world, there was nothing more interesting than a reverse Morris Trust. McCormick gets it just for interest, just for that because they are doing this. They're using this cool thing where they are merging with part of Unilever, and Unilever gets to spin it off tax free. I'm real curious about this because it used to be deals like this made sense. Self space mattered. Jamming more things into a truck that's heading to the store. That gives you scale. That gives you synergies. That was supposed to matter. Recent history, including Kraft Heinz, and some other deals we can get to, it's less settled science now whether that works. Maybe this is an opportunity to find out how much of what went wrong in other deals was the management execution compared to just the strategy. The strategy could make sense. McCormick and paper, I think, is better managed, so I am at least curious to see how this plays out. Tyler Crowe: To lose point, thinking about, like, jamming stuff into trucks, it certainly there is some sort of logic to what's going on here, but I feel like M&A activity specifically in consumer brands has been like that joke from the TV show Arrested Development. It became like an Internet memo. It's like, "Well, did it work out for them?" Then they go, "No, they delude themselves into thinking, will work, destroys value." But it could work for us. Every single time, I've been running through, like, the mental rolodex of consumer goods deals over the past decade, where you can say it was definitively a win for its investors. We mentioned Kraft Heinz. That was a blunder. The Anheuser-Busch InBev buying SAB Miller to unite the Beer World. That was not so great. Keuring Dr. Pepper Merger hasn't turned out too well, either. I mean, the jury's still out on this recent one with Kimberly Clark and Kenvue but I can't think of a major consumer brands deal where we're like, yes, really good stuff. Now, consumer brands is historically a defensive sector. The goal for some investors maybe just collect a dividend and call it a day. It's fine. That's what a lot of investors want. But aside from this track record of value destruction at these major brands has to be a red flag going into these deals, don't you think? Lou Whiteman: My theory here is it's not the deals. It's the companies. The value of brands have been diminished over the course of the last 20 years or so. I blame the Internet, better flow of information, but who knows? But consumer goods to me today is a barbell. Most consumers will pay up for certain specific items, whether it's on holding shoes at any given moment or one just splurge. But otherwise, consumers are happy to buy generic. That's a nightmare for these mid tier brands, and that's most of what we're talking about with Kimberly Clark, Ken view, Kraft and Heinz. If that's the case, this is a bad move for McCormick. Honestly, I believe enough that I personally try not to invest in brands in the middle. The bottom line is, I don't think people still find value in buying, say, Tylenol versus Kroger brand, Tylenol. That's a problem for anyone selling these why distribution, but a little bit extra because it's a brand name products. Matt Frankel: There have been a few decent examples of deals like this that have worked. Performance Food Group, getting back to the Sysco situation is one that looks really interesting. Ticker symbol is PFGC and 2019-2023, it acquired three of its major competitors, including Cheney Brothers, which is a big Sysco competitor. A major reason was to add new consumer segments, which is one of the reasons Sysco's acquiring restaurant warehouse. The stock is up 160% since the start of 2019, so I'd call that a pretty solid example and a pretty close parallel, but I completely see your point, there is a lot that can go wrong with these types of acquisitions, especially when a company like Sysco is taking on $21 billion of new debt to make it happen. Tyler Crowe: Just for keeping score, too, the deal between Unilever and McCormick is also going to be taking on a rather considerable portion of debt, as well. Whatever happens with these, the question for the next couple of years is, how quickly can we get these debt levels back down to pay off and make these things worth their while? We will be watching that. Then after the break, we're going to look at another M&A deal, but completely unrelated industry. Speaker 1: In January of 1915, Ernest Shackleton's ship Endurance became encased in the ice in the Weddle Sea. Through determination, grit, and savvy, Shackleton would lead his men through a brutal winter, then over hundreds of miles of Antarctic ice, followed by 800 miles across some of the roughest waters in the world. It is one of the most extraordinary and inspirational journeys in the history of exploration. Find this story and many others at the Explorers Podcast available wherever you get your podcast or at explorerspodcast.com. Tyler Crowe: We're going to shift gears in the industries we're talking about. We're going to stick with M&A. Yesterday, Eli Lilly announced it was acquiring Centessa Pharmaceuticals. As the case with most biotech deals, it is contingent on Centessa a meeting some milestones. But assuming a Centessa hits them, the deal is worth approximately $7.8 billion. Now, I'm going to leave it to you, Matt, to get into the details of what it does. But Centessa is a clinical stage development company that's looking to treat narcolepsy. But why is Eli Lilly willing to fork over $7 billion for a company that doesn't really even have a commercial treatment yet? Matt Frankel: Yeah, that's a really good question. As you mentioned, they're a clinical stage pharmaceutical. They develop treatments for rare diseases. It's not just narcolepsy. They have some other things in the pipeline, but that's their most promising candidate. They have a product that's in later stage trials. It just passed Phase 2 trial that was very promising. The main product, it looks like it's going to become the first to market treatment and the most effective for several forms of narcolepsy, and this is estimated to be a $5 billion market. It has several other treatments, like I mentioned in earlier trials, but that drug is why Lily's buying it. The idea is that Lily's capabilities can help it accelerate its time to market. If it's successful in obtaining FDA approval, which those milestones you mentioned, in order to get that full 7.8 billion, it would have to get FDA approval for all these forms from narcolepsy. If that happens, the treatment could be worth several times what Lily's paying for it. It's a big if, but that's the goal. Lou Whiteman: That's why Lily's paying up for a company that doesn't have a commercial product yet. This is just a big part of how R&D works in the industry. I mean, look, I've seen estimates it's almost $2 billion that Big Pharma spends to get just one drug into production through clearance. If you can do closer to a sure thing for 7 or 8 billion, suddenly, it doesn't look too bad. In Lily's case, too, this is a proactive move to make sure that this does not become a one hit wonder or one product company. Right now, about 60% of Lily's revenue comes from GOP ones. If anything, given all of the trials they have for different treatments, trying to get other GLP treatments on label, that's likely to only go up from here. The nature of Pharma is all good things come to an end. You're constantly racing to stay ahead of a patent expiration cliff, investing in a prominent therapy outside of GOP ones. That makes a lot of sense, assuming their scientists think that there is a there here, and I'm going to leave it to their scientists and not me to say whether or not what they're buying really makes sense. Apparently, they think so. Tyler Crowe: To that point, too, I'm not going to claim to be somebody who can read clinical trial data very well and say whether it's good or bad and the direction they're going. But as somebody who has invested in the space from time to time, there are some hard numbers that investors should think about when looking at clinical stage, pharmaceutical companies, and it's something around, like 20-30% of drug candidates that start a Phase 2 clinical trial. End up actually getting all the way through trials and FDA approval. You want to think of it as almost like companies with lots of shots on goal in their development pipeline, because, there's no far growing conclusion that any of these in particular ones are going to make it through. As we mentioned, there are some contingencies built into the deal that says, "Hey, you have to meet these milestones for us to actually pay out the number that we're seeing." I want to shift gears a little bit, talking about healthcare in general, I want to get you guys' thoughts, but I don't want to drift too far here. One thing that's hard to shake when looking at the industry right now is FDA approvals. The rules and processes for getting approvals look pretty different in this current administration than prior ones. I think we mentioned it on a prior show earlier this year, Moderna's CEO Stephane Bancel, said that it is scaling back clinical trials for its MRNA vaccines because it would be as his quote said, difficult to see return on investment. That was specifically tied to MRNA vaccines, and we know that the current administration's position on vaccines is very different than what we've had in the past. I know that both of you have some ties to the healthcare industry, through your families and stuff like that. But as you look at this space as investors, have the recent changes in FDA approvals maybe changed the way you think about investing in clinical stage companies, at least in the time being? Matt Frankel: I generally avoid the pharmaceutical industry for the reasons that you mentioned, because only 20-30% of the drugs that pass phase two trials actually come to market. For me, it hasn't really changed the way I invest, personally, but it's definitely something that healthcare investors should take into account. Lou Whiteman: I am due to family. For most of my career, I've been restricted by conflict of interest. I can't that's an easy answer for me. But I will say this. These are long term projects. It takes upwards of a decade to get some drugs through clearance. I don't think these companies have to worry about any one regime because usually, things have changed over the course of it. I think it's something for invest