Court delays $3.5B Sysco-US Foods deal after legal challenge
NEW YORK (AP) — A court on Tuesday temporarily blocked Sysco from buying US Foods, a deal opposed by regulators who say it would reduce competition between food supply companies.
The U.S. District Court for the District of Columbia granted an injunction blocking the companies from combining until legal proceedings are resolved. The Federal Trade Commission showed that a delay is in the public interest because the $3.5 billion acquisition could reduce competition, Judge Amit Mehta said.
Houston-based Sysco Corp. said it is disappointed and will review the ruling and consider its options, including pulling the plug on the purchase. Its shares lost 99 cents, or 2.6 percent, to $36.60 in aftermarket trading.
The FTC said it looks forward to proving its case at trial. It has said the deal would likely lead to higher prices for the companies’ customers, which include restaurants, hospitals, hotels and schools.
Sysco announced its plan to buy US Foods, which is based in Rosemont, Illinois, in December 2013 but the companies need the FTC’s approval to close the deal. The agency filed a complaint to stop the sale in February. The agency noted Sysco and US Foods are the largest companies in their industry.
Sysco and US Foods agreed to sell 11 food distribution centers in order to address concerns from the agency, but the FTC wasn’t satisfied. The agency said the buyer, Performance Food Group, wouldn’t be big enough to offer significant competition.