Sysco terminates US Foods merger agreement

by Keith Nunes
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Sysco, although disappointed by the failed merger with US Foods, prepares to move forward.

HOUSTON – Distributor Sysco Corp. has ended its effort to acquire rival distributor US Foods, Rosemont, Ill. The company made the decision several days after the US District Court for the District of Columbia granted a Federal Trade Commission request for a temporary injunction to block the merger.

“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,” said Bill DeLaney, president and CEO of Sysco. “We believed the merger was the right strategic decision for us, and we are disappointed that it did not come to fruition. However, we are prepared to move forward with initiatives that will contribute to the success of Sysco and our stakeholders.”

Under terms of the merger agreement, the termination of the transaction requires Sysco to pay break-up fees of $300 million to US Foods and $12.5 million to Performance Food Group, which was going to acquire US Foods plants in 11 markets as part of the transaction.

In December 2013 Sysco announced plans to acquire US Foods for approximately $8.2 billion. At the time the merger was announced, the transaction was to bring together Sysco, a food distributor with $44 billion in sales to restaurant, health care, educational, lodging and other customers with US Foods, a food service supplier with $22 billion in annual sales.

In February 2015, the FTC filed an administrative complaint charging that the proposed merger would “eliminate significant competition in the marketplace” and create “a dominant national broadline food service distributor.”

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