Sysco to Contest FTC Move Blocking Merger With U.S. Foods

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Sysco Corp. said it will contest a move by the Federal Trade Commission to block its proposed merger with US Foods.

The FTC on Feb. 19 said it would seek a court order to prevent the two companies from consummating a merger because the deal would “eliminate significant competition in the marketplace.”

A combined Sysco/US Foods would create a national broadline foodservice distributor with an estimated 75% share of the market for goods supplied to large customers, such as restaurant and hotel chains, hospitals and schools. The merger would also harm competition in 32 local markets, according to the FTC complaint.

Supporting the FTC action were attorneys general from California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee and the District of Columbia.

Sysco President Bill DeLaney said the FTC’s decision ignores the fact that customers will continue to have access to many local and regional suppliers. The company had also proposed selling US Foods facilities in 11 states to Performance Food Group, allowing that company to compete more effectively for customers across the country.

“This merger has always been about serving customers better and driving costs out of the system,” DeLaney said. “By unlocking at least $600 million in annualized cost synergies, the merger will allow Sysco to lower costs for customers, deliver better service and improve selection across all product segments.”

The slim margin of the vote by the five members of the FTC, with three voting to support a preliminary injunction to stop the merger and two voting against, “demonstrates a lack of consensus within the commission that the proposed merger could be viewed as harmful to competition under the law,” DeLaney said.

Sysco and US Foods rank No. 2 and No. 5, respectively, on the Transport Topics list of the Top 100 Private Carriers in North America with combined fleets of 13,085 tractors and 16,049 trailers. Performance Food Group ranks No. 14 with 2,349 tractors and 2,899 trailers.