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FTC intends to block Sysco-US Foods merger

The Federal Trade Commission announced today that it intends to block the proposed $8.2-billion merger of Sysco and US Foods, the restaurant industry’s two largest distributors, because their combination would hamper competition.

The regulatory agency said it will ask a federal court for a temporary restraining order to halt the merger and keep the companies functioning independently until administrative proceeding are concluded.

“This proposed merger would eliminate significant competition in the marketplace and create a dominant national broadline foodservice distributor,” Debbie Feinstein, director of the FTC’s Bureau of Competition, said in a prepared statement. “Consumers across the country, and the businesses that serve them, benefit from the healthy competition between Sysco and US Foods.”

 “The facts are strongly in our favor and we look forward to making our case in court,” said Bill Delaney, president and CEO of Sysco. “Those of us who work in this industry every day know it is fiercely competitive. Customers of all types have access to food distribution services from a wide variety of companies and any number of channels.  In fact, the overwhelming majority of restaurants and food operators choose their foodservice distributor locally, where they have choices among many excellent companies."

Sysco recently offered to foster more competition by agreeing to sell 11 US Foods distribution centers to the industry’s third-largest distributor, Performance Food Group, after the merger was completed.

The agency asserted that a combined Sysco-US Foods distributorship would control 75 percent of the foodservice wholesale market.  Other observers, including a number of financial analysts, have pegged the post-deal market share around the mid-30-percent range.

The FTC’s decision had been expected. Sysco had reportedly beefed up its legal resources in anticipation of a legal challenge of the deal from the FTC.

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