No. 3 distributor says Sysco-US Foods merger would be favorable

The top executive of Performance Food Group Inc. on Thursday said his company would be in a position to become a significant national competitor if its two larger rivals, Sysco Corp. and US Foods Inc., are allowed to merge.

The federal court testimony from PFG Chief Executive George Holm came on the third day of proceedings before U.S. District Judge Amit Mehta, who is considering a challenge by the Federal Trade Commission to the proposed combination of Sysco and US Foods, the nation's top two food distributors.

The companies have sought to address antitrust concerns about the merger by agreeing to sell 11 distribution centers to PFG that generate $4.6 billion in revenue.

The FTC argues the concessions aren't enough to remove the potential risk of higher prices to restaurants, hotels, schools and other entities that buy food from distributors like Sysco and US Foods.

Mr. Holm on Thursday said the assets would significantly boost his company's geographic scope, and he outlined plans to build out the company's food distribution capacity further beyond the distribution centers it is in line to acquire.

Mr. Holm's testimony began Wednesday afternoon and took up most of the court session on Thursday, longer than originally anticipated and a signal that both sides view the executive's statements as important to the case.

Mr. Holm said that after the Sysco-US Foods merger and the divestitures to PFG, his company would be ready at the outset to compete for business from large national customers. PFG would be a competitor "that will be taken seriously," he said.

The executive, under questioning from a Sysco lawyer, also sought to undercut the FTC's argument that PFG wouldn't be a sufficient replacement distributor in the national market because it would continue to have geographic gaps in its business, even after the divestitures.

Mr. Holm said his company could service certain regions even where distribution centers aren't close by. In some cases, PFG saves money by concentrating its inbound purchases from food manufacturers into fewer facilities, even if it means that delivery trucks have to travel further to customers to deliver those goods, he said.

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