WASHINGTON -- Sysco Corp. president and CEO Bill DeLaney the company is "profoundly disappointed" with the decision by the U.S. District Court in the District of Columbia to grant the Federal Trade Commission's (FTC) request for a preliminary injunction to block Sysco's proposed merger with US Foods Inc.
Sysco, Houston, and US Foods, Rosemont, Ill., are the largest broadline foodservice distributors in the United States. The companies announced the $8.2 billion merger in December.
At CSP Business Media's 2015 FARE foodservice conference in Nashville, Tenn., Tom Bene, president of Sysco’s foodservice operations, addressed the judgment that had been handed down less than 12 hours earlier.
“It’s amazing what 48 hours can do to you,” he said, according to a report by Peter Romeo, director of digital content for CSP Daily News's sister publication Restaurant Business. “While we are obviously disappointed. I wanted you all to know, thank you. Thank you to all of our partners who have supported us for the last 18 months.”
US Foods executive vice president David Schreibman had said during the court proceedings that his company would not be willing to persevere through further legal moves and a continuation of the uncertainty. His frustration with a deal two years in the lurch clearly does not bode well for a resumption of the courtship, said Romeo.
As reported in a 21st Century Smoke/CSP Daily News Flash, according to the FTC complaint filed in February, a combined Sysco-US Foods would account for 75% of the national market for broadline distribution services. In addition, the parties would also hold high shares in 32 local markets. The FTC also charged that the proposed sale of 11 US Foods distribution centers to Performance Food Group would neither enable PFG to replace US Foods as a competitor nor counteract the competitive harm caused by the merger.
“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 judge wrote in a two-page order cited by The Wall Street Journal.
"While we respect the court's decision, we are profoundly disappointed with this outcome," said DeLaney in a statement release immediately following the announcement of the decision. "We diligently pursued this transaction for nearly two years because we strongly believed the merger of Sysco and US Foods would be procompetitive and good for customers, associates and shareholders."
Signaling the company's strategy to react to the ruling, he added, "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. This work will be conducted in close collaboration with Sysco's board of directors and the primary owners of US Foods. We will provide additional clarity in the coming days."
In a press statement, FTC Bureau of Competition director Debbie Feinstein said, “The Court's ruling … temporarily blocking Sysco’s proposed acquisition of US Foods will preserve competition in both local and national broadline foodservice distribution markets. We look forward to proving at trial that this deal would lead to higher prices and diminished service for customers, including restaurants, hospitals, hotels and schools."
Click here for additional analysis of the decision by Peter Romeo atRestaurant Business.
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