Foodservice Equipment Reports

FTC Holds Off Vote On Sysco/US Foods Deal

The Federal Trade Commission has blinked. Last Wednesday night, the regulator was close to voting to block Sysco Corp.’s $3.5 billion purchase of rival US Foods, but postponed the decision after an intense day of meetings with Sysco.

Sysco, the country’s largest broadliner, met last week with the FTC’s five commissioners in a last-ditch attempt to avert a possible antitrust lawsuit blocking its heavily scrutinized acquisition of US Foods, its closest competitor.

Sysco’s proposal to create competition for itself by selling No. 3 broadliner Performance Food Group Co. 11 US Foods distribution centers with a combined $4.6 billion in annual revenue does not appear to be allaying concerns at the FTC.

That divestiture agreement would make Performance Food more competitive nationally, but it still would be only about a third of the size of a merged Sysco-US Foods, which would have more than 240 warehouses and $60.4 billion in annual sales. Performance Food would have $18.3 billion in annual sales and 78 distribution centers.

Amid an outcry from the foodservice, restaurant and food-distribution industries that the combined Sysco-US Foods will yield too much power and inevitably lead to higher prices, Sysco is trying to convince the FTC that cost savings from the merger actually will allow it to lower prices. Its efforts appeared to be failing and the FTC was leaning toward suing to block the deal until the Houston-based company told commissioners it is willing to consider “additional flexibility” on providing a solution to regulators’ concerns.

The FTC has put off a vote, for now. A majority of the FTC commissioners—three Democrats and two Republicans—must support any course of action, whether to accept the deal from the companies or challenge it in court.

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