Sysco-US Foods Deal Blocked

2015-06-25

On Tuesday, a federal judge issued a preliminary injunction blocking Sysco Corp.’s planned acquisition of US Foods, Inc.  Observers suggest that the ruling could kill the $3.5 billion deal announced in December 2013 to combine the nation’s two largest food distributors. The ruling is in response to a lawsuit filed by the Federal Trade Commission (FTC), challenging the acquisition on antitrust grounds.

The FTC has feared that the merger would leave customers—including schools, restaurants, hotels and other foodservice operations—vulnerable to higher prices and reduced service. The companies, on the other hand, contend that a merger would allow them to improve efficiencies and reduce costs, thus improving service.

In the ruling, U.S. District Judge Amit Mehta noted, “The FTC has shown that there is a reasonable probability that the proposed merger will substantially impair competition in the national customer and local broadline markets and that the equities weigh in favor of injunctive relief.” The ruling, redacted for private business information, will be released to the public on Friday.

While Sysco Chief Executive Officer Bill DeLaney said the company “was profoundly disappointed” with the decision, “Nevertheless, we certainly understood this outcome to be possible and have been developing plans for the business moving forward. We will take a few days to closely review the Court’s ruling and assess our legal and contractual obligations, including the merits of terminating the merger agreement.” US Foods Chief Executive Officer John Lederer said his company is “ready for whatever comes next.”

Update: On Monday, June 29, 2015, Sysco CEO Bill DeLaney released a statement saying, "After reviewing our options, including whether to appeal the Court's decision, we have concluded that it's in the best interests of all our stakeholders to move on.”

 

 

 

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