Sysco Facing Challenges with US Foods Merger

Tue. October 21st, 2014 - by Andrew McDaniel

HOUSTON, TX – Sysco is facing more challenges in its proposed purchase of US Foods for $3.5 billion.  Reuters reports that the top two lawmakers on the Senate’s antitrust panel have urged regulators to scrutinize the plan.

Senators Amy Klobuchar and Mike Lee, the Chairwoman and ranking member of the Senate’s Antitrust Subcommittee, said in a letter obtained exclusively by Reuters that the deal being investigated by the Federal Trade Commission “raises important competition issues the commission should carefully review and closely scrutinize.”

The letter, sent to FTC Chairwoman Edith Ramirez, said that the lawmakers took no position on whether the FTC should try to block the deal

As we previously reported, executives from Sysco are in talks with the U.S. Federal Trade Commission (FTC) to try to save its merger with US Foods from a potential antitrust lawsuit.

The New York Post reports that the FTC is expected to decide by October 31 if it will block the deal between the number 1 and 2 food distributors in the country. 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.

Sources tell the Post that Deborah Feinstein, FTC’s Head of Competition, has told the FTC’s five commissioners that she is ready to sue to block the deal unless certain conditions are met.  Those conditions 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.

According to Reuters, Sysco is currently trying to craft a package of potential asset sales with enough weight to convince U.S. antitrust regulators to approve the deal.

Sources with knowledge of the FTC’s viewpoint tell Reuters that the Commission remains concerned about the loss of the only national competitor to Sysco.  Currently, Sysco and US Foods are the only companies with a geographic reach large enough to offer nationwide contracts to deliver a range of goods to customers.

For now, we will have to wait and see what the FTC decides.  Stay tuned to AndNowUKnow for the latest updates on this developing story.


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