00:00Liana, what is the thinking behind the joining of these two very large restaurant servicing companies?
00:05For Cisco, the key is going to be cash and carry.
00:08That's Jet Show Restaurant Depot's big business.
00:11As a mom and pop owner or any restaurant owner, you show up with your credit card,
00:15you take what you need, whether it's meats or fish or fruit, it's heavily discounted,
00:20and then you leave that day.
00:21This is a new business for Cisco.
00:23Cisco has more consulting-type relationships with their big customers,
00:27whether it's hospitals or stadiums or massive restaurant chains, where you have huge orders.
00:33These are smaller orders, and Cisco believes this is going to be more resilient to what happens in the economy.
00:39Apparently, in a downturn, smaller restaurants want to save money,
00:44and these businesses, cash and carry, do pretty well.
00:47The stock, though, is getting hammered.
00:49I mean, down 12.5% thereabouts.
00:51There's something here, not even just the fact that they're the acquirers, they might fall,
00:56but there's something here that clearly shareholders aren't really liking.
00:59So I would say that even though these companies knew each other for 50 years,
01:03which is what Cisco said on the conference call, it was a bit of a surprise to see this deal
01:06this morning.
01:09$22 billion in debt Cisco is going to have to raise for it, and there's also a stock component,
01:14and that means it's going to be dilutive to shareholders.
01:17So all of that came as a surprise and why you might see a bit of an overhang on the
01:22stock.
01:22And I know Fitch and Moody has also said that they were looking for a possible downgrade.
01:26I mean, we've seen in financing from some of the biggest banks about terms being disputed.
01:31There was that JPMorgan CDNR.
01:33How difficult would it be for a company like this to get this deal done,
01:37to raise $21 billion of debt, and to have a market digested,
01:40and to not have themselves downgraded off the back of it?
01:43Sure. Well, Cisco Foods is a really big company.
01:46You might see their trucks everywhere.
01:47So it's sort of a blue chip name, even through a downgrade.
01:49You know, this is a company people know.
01:51You could see their balance sheet, their sales, and this deal will add 20% revenue to the balance sheet.
01:59So I think there's going to be a lot to like long-term for Cisco if you buy into what
02:05they're saying.
02:06But certainly this restaurant, Depot, is a great business.
02:09It started here in New York.
02:11It's actually controlled by a South African billionaire.
02:15And Leonard Green, a private equity firm, also had a stake in it.
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