Foodservice Equipment Reports

Sysco/US Foods Acquisition Remains A Question Mark

Despite moves to create a more even playing field, Sysco Corp.’s planned acquisition of US Foods has hit an impasse.

The country’s largest foodservice distributor says its year-long negotiations with antitrust regulators over the acquisition have come to a standstill despite Sysco’s just-proposed agreement to create competition for itself by selling rival broadliner Performance Food Group Co. 11 US Foods distribution centers with a combined $4.6 billion in annual revenue.

That divestiture agreement, contingent on Federal Trade Commission approval of the US Foods deal, would make Performance Food more competitive nationally, but it still would be only about a third the size of a merged Sysco-US Foods. The deal covers distribution centers that make up nearly a quarter of US Foods’ sales; it includes three facilities in California, and others in Cleveland; Denver; Kansas City, Mo.; Las Vegas; Minneapolis; Phoenix; Salt Lake City and Seattle.

Sysco has been in talks with the FTC for more than a year over the US Foods acquisition, which would create a giant with more than 25% market share, before the divestitures.

The FTC has given the $3.5 billion deal close scrutiny since it was announced in December 2013 amid concerns from foodservice operators and distributors, as well as unions, that a merger would give Sysco too much pricing power. Sysco counters that the market is highly competitive and many restaurant chains divide their business among different foodservice distributors.

Even with the divestiture, Sysco-US Foods would be by far the biggest foodservice distributor in the country, with more than 240 warehouses and $60.4 billion in annual sales. Performance Foods would have $18.3 billion in annual sales and 78 distribution centers.

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