UPDATE 1-Performance Food Group to buy peer Core-Mark in $2.5 bln deal

(Adds details on deal, background)

May 18 (Reuters) - Grocery distributor Performance Food Group Co will buy peer Core-Mark Holding Co in a $2.5 billion deal including debt, in a move that would expand its business with convenience stores.

Core-Mark shareholders would receive $23.875 per share in cash and 0.44 Performance Food Group shares for each Core-Mark share, the companies said on Tuesday, with shareholders of the target firm owning about 13% of the combined entity.

The deal values each Core-Mark share at about $46.64 per share, according to a Reuters calculation, which represents a premium of about 11% to the stock’s last close.

In its last fiscal year, Performance Food Group made about two-thirds of its revenue from its foodservice channel, which includes sales to restaurants, cafes and hotels. Its Vistar division that caters to vending operators and convenience stores brought in about a third of the group’s revenue.

Scott McPherson will remain Core-Mark’s chief executive officer following the sale, which is expected to close in the first half of 2022, the companies said.

After completion, the deal would add to Performance Food Group’s adjusted earnings in the following first full fiscal year. (Reporting by Praveen Paramasivam in Bengaluru; Editing by Vinay Dwivedi and Ramakrishnan M.)