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Sysco Drops Plans to Purchase US Foods After FTC Ruling

After two years of negotiation, Sysco has removed their proposal for the purchasing of US Foods.

US Foods is a national food distributor, who works for brands like Cattleman’s Selection, Glenview Farms, Hilltop Hearth and many more.

Sysco helps foodservice operators that works with 425,000 customers who sells, markets and distributes food to places like restaurants and educational facilities.

Sysco President Billy DeLaney said in a press release, “We believed the merger was the right strategic decision for us, and we are disappointed that it did not come to fruition. However, we are prepared to move forward with initiatives that will contribute to the success of Sysco and our stakeholders.”

Talks of the purchase was started in 2013 where Sysco would buy out US Foods for $3.5 billion. The purchase, as of now, has taken a year and a half to see any real results. The purchase struggled to be completed after there was backlash.

DeLaney said, “After reviewing our options, including whether to appeal the Court’s decision, we have concluded that it’s in the best interest of all our stakeholders to move on.”

If the deal had gone through, Sysco would have had control of distributions of foods for over 75 percent of the market.

“Everything starts with the customer. Our vision remains clear: to be our customers’ most valued and trusted business partner. If our customers succeed, then we succeed. Our relentless focus on providing exceptional customer service and differentiated solutions to help our customers grow is unwavering,” said DeLaney.

DeLaney is referencing the Federal Trade Commission’s block on the merging of the two companies. The FCC stopped the merger because the commission feared it could lead to increased prices and a lack of diversity in the distribution of foods.

The FCC was not alone in this fear.

According to Forbes, “State attorneys general in California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee, North Carolina, and the District of Columbia joined the FTC in its complaint this February.”

Sysco had offered alternatives, such as dismantling over 11 of the U.S. Food distribution centers, out of their 60 different locations nationwide, and therefore giving Sysco less power if the acquisition went through, but this was not sufficient.

According to Director of the Regulator’s Bureau of Comeptition, Debbie Feinstein, “Sysco and U.S. Foods’ decision to abandon the transaction is a victory for both competition consumers. The evidence shows that Sysco and U.S. Foods were strong rivals in borderline food distribution whose combination would have harmed consumers.”

Sysco had first declared that they would take a few days to reconsider their plans, and have ultimately decided not to go through with it.

As a result, the $8.2 billion deal will not go through, and instead Sysco will give $300 million to U.S. Foods and $12.5 million to Performance Food Group, who had intended to buy the 11 U.S. Food Distribution Centers, had they been broken off from the company as a planned alternative.

Bruce Solker, the Chair of the Antitrust Section at the Law Firm Mintz Levin told Forbes, “This is a very big win for the FTC. They were able to establish how to define a national market for national customers in a hotly contested case.”

Despite the ending of the case, the company still has plans to seek out other, more feasible acquisitions.

Without the merger, there would be more fierce competition, which is better for the market place. This is what the FTC was aiming for in their decision, and there is hope that companies will consider this ruling before trying to merge into one super company.

Image via ‘Sysco’

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