Blog: Dean BestSysco ends plan for US Foods foodservice merger

Dean Best | 1 July 2015

US foodservice distributor Sysco has pulled the plug on its plan to buy local rival US Foods, four months after the country's competition watchdog moved to block the deal.

The transaction, announced back in December 2013, sought to combine the two largest foodservice distributors in the US. At the time, Sysco said the transaction, if approved, would create a business generating annual sales of around US$65bn.

However, in February, the Federal Trade Commission announced it had decided to seek a court order temporarily preventing the two sides from completing the deal, arguing it would hit competition.

Sysco's largest customers include quick service restaurant chains like McDonald's and Wendy's but it has around 425,000 clients across the US.

Both Sysco and US Foods serve a wide range of customers, including restaurants and hotels but also healthcare and educational establishments.

According to the FTC, a combined Sysco/US Foods would have accounted for 75% of the national market for broadline distribution services.

Earlier in February, Sysco announced a move it thought could head off any anti-trust concerns. Sysco said it would sell 11 US Foods distribution centres to distributor Performance Foods Group. It was a transaction Sysco believed would address the FTC's concerns. For its part, Sysco has said it would "contest" the FTC's decision to block its move for US Foods.

However, just days after a US court granted the FTC's request for a preliminary injunction, Sysco, in a short statement on Monday (29 June), announced it had ended its plan to buy US Foods.

"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," Bill DeLaney, Sysco's president and CEO, said. "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."

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