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Sysco asks a federal court to green-light merger with US Foods

Sysco Corp. has fired back at federal regulators looking to block the distributor’s merger with US Foods, formally requesting the U.S. Federal District Court to hold off on halting the $8-billion deal. 

Although the memorandum filed with the Washington, D.C., court was sealed, Sysco simultaneously issued a press release spelling out its arguments against the Federal Trade Commission’s request for a temporary injunction. Among other things, the company asserted that combining the industry’s two largest distribution companies would cut costs by $600 million, which would then be passed along to foodservice customers in the former of lower prices, enhanced services and new products.

The overall thrust of Sysco’s argument is that the merger would enhance, not throttle competition, contrary to the FTC’s assertions. It notes the agency’s contention that a Sysco-US Foods combination would give the resulting company total control of the San Diego market, with virtually a 100-percent share of the distribution business there. “In reality, more than two dozen companies compete for customers’ business in San Diego,” Sysco said in its press statement. “Local market dynamics are similar across the U.S.”

The company also noted that it has agreed to sell 11 US Foods distribution centers to the number-three player in the business, Performance Food Group, strengthening that company’s competitive stance.

Hearings on the FTC’s request for an injunction are scheduled to begin on May 5. "We look forward to presenting all of the facts in court,” Sysco CEO Bill Delaney said.

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