FTC Considers Antitrust Lawsuit to Stop Sysco/US Foods Merger


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Tue. September 23rd, 2014 - by Christofer Oberst

HOUSTON, TX and ROSEMONT, IL - The $8.2 billion deal between Sysco and US Foods is now being threatened by a potential antitrust lawsuit from the Federal Trade Commission (FTC), according to the Wall Street Journal.

In spite of Sysco’s latest statement that the acquisition is still on track, people familiar with the matter are currently suggesting that the FTC is concerned that the deal could threaten competition. This is the question that has continually plagued the deal ever since its first announcement late last year.

Though the Commission has not yet decided whether to challenge the deal, a decision “could come within weeks,” the Wall Street Journal reports.

Bill DeLaney, Sysco President and CEOLast June, Bill DeLaney, Sysco President and CEO, said, “We continue to believe that the Commission, once it finishes its investigation, will conclude that our industry is – and will continue to be – fiercely competitive. Our proposed merger will benefit customers and help us become more efficient in this rapidly evolving marketplace.”

The merger has since then been delayed and could close during late Q3 or during Q4, pending final approval by the FTC.

If the FTC does indeed approve the deal, the two businesses would represent more than 25% of the $231 billion U.S. food-distribution industry, according to Wall Street Journal. This is not large enough to be considered a monopoly however, analysts suggest. I further considered the implications of the deal in a previous article, noting that at worst, investors say that the FTC may simply force Sysco to divest assets in areas where there’s too much geographical overlap. A Barclays report states that a number of industry experts believe that Sysco would have to divest approximately 15 facilities, or $6 billion of its revenues.

Sources tell AndNowUKnow that the merger shouldn’t concern larger suppliers, but it could possibly have an effect on some smaller suppliers who have a greater allocation for their customer base.

Brian Shapiro, Owner of Shapiro’s Delicatessen in Indianapolis, echoed these comments. “Sure, there are little produce companies and meat companies that mirror US Foods and Sysco, but in terms of dry and frozen goods, no small distribution firm can compete,” he told the Wall Street Journal.

Nevertheless, Wall Street Journal also reported in May that smaller competing suppliers, such as Jetro Holdings LLC, are growing fast, suggesting that this mega merger might have little effect on the competitive market, if at all.

The next biggest question on the FTC’s mind would be if competing food distributors looking to acquire divested assets from Sysco and US Foods would be enough to address concerns regarding the loss of competition from the merger.

Whether questions like these will be answered anytime soon remains to be seen. In the meantime, let us know what you think by voting in the survey below.

Stay tuned to AndNowUKnow for any future updates on the FTC’s examination of the merger between Sysco and US Foods.

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