Sysco to Contest FTC Block of Proposed Merger
Sysco Corporation announced it will contest the U.S. Federal Trade Commission's (FTC) attempt to block its proposed merger with US Foods.
The company said it is looking forward to a full judicial review of the significant competitive benefits of the merger.
The five FTC Commissioners voted 3-2 to seek a preliminary injunction in the U.S. District Court for the District of Columbia to prevent the parties from closing the transaction.
Sysco believes that the FTC's decision is based on an erroneous view of the competitive dynamics of the foodservice distribution industry.
"Those of us who work in this industry every day know it is fiercely competitive,” says Bill DeLaney, Sysco's president and CEO. “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."
"For example, the FTC claims that Sysco and US Foods combined have a 75 percent market share in a national broadline market, ignoring the fact that the vast majority of national customers use multiple regional or local distributors,” DeLaney continues. “Additionally, the FTC claims the merger would harm competition in 32 local markets, ignoring the existence of myriad local suppliers, including broadline companies, specialty companies, cash-and-carry, and club stores with whom Sysco and US Foods compete on a daily basis."
Sysco delivered a substantial divestiture package to enable Performance Food Group (PFG) to compete more effectively for customers coast to coast.
"By unlocking at least $600 million in annualized cost synergies, the merger will allow Sysco to lower costs for customers, deliver better service, and improve selection across all product segments, all of which will increase competition across the entire foodservice distribution industry to the benefit of customers,” DeLaney says.
Sysco offered the following as benefits for stakeholders in the proposed merger:
1. Customer Focus
The merger of Sysco and US Foods will benefit customers and help the business become more efficient in an evolving and competitive marketplace. This includes providing the highest quality service, great brands and competitive pricing.
2. Substantial Efficiencies
The proposed merger creates supply chain efficiencies through the optimization of inbound and outbound freight and the opportunity to partner more closely with suppliers and brokers to address customer needs and help them grow their businesses. Sysco estimates it will be able to achieve net annual synergies of at least $600 million in four years even after its announced divestiture to Performance Food Group (PFG).
3. Enhanced Employee Opportunities
The combined business will continue to be a significant national and local employer. By combining the strengths of the two companies, Sysco will provide employees even more opportunities to grow and develop their careers.
4. Substantial Divestiture Package
As previously announced, the definitive divestiture agreement includes selling US Foods facilities in 11 markets to PFG upon consummation of the merger. These facilities, representing approximately $4.6 billion in annual sales, will expand PFG's geographic footprint in the U.S. and enable PFG to compete more effectively for customers coast to coast.