Court delays Sysco-US Foods deal after legal challenge

Staff and wire reports
Court's decision only delays Sysco-US Foods merger for now

A court has granted an injunction temporarily blocking Sysco from buying US Foods, a deal that regulators oppose because they say it would reduce competition between food supply companies.

The U.S. District Court for the District of Columbia says the Federal Trade Commission showed that a delay is in the public interest because the $3.5 billion acquisition could reduce competition.

The FTC challenged the deal in February and filed a complaint to stop it, joined by Maryland Attorney General Brian E. Frosh and counterparts from nine other states and the District of Columbia.

The complaint said combining Sysco and US Foods, the largest companies in their industry, likely would lead to higher prices for restaurants, hospitals, hotels and schools. The combined entity would control about 75 percent of the national market and 80 percent of the market in the Baltimore-Washington corridor, the Maryland attorney general's antitrust division noted in its complaint.

While both companies operate large distribution centers in Central Maryland, US Foods said last week it was planning to close its Severn warehouse, where it employs 350 workers, and consolidate those operations at a Virginia facility. It said the "tentative decision" was unrelated to the merger.

Sysco Corp. says it is disappointed and will review the ruling and consider its options, including pulling the plug on its purchase of US Foods' parent, USF Holdings Corp., valued at $8.7 billion counting assumed debt.

The delay afforded by the court's decision gives the FTC more time to complete a full administrative review of the proposal before it can proceed.

"This is terrific news for anyone who eats. And that means all Marylanders," Frosh said in a statement. "This proposed merger would reduce competition and lead to higher prices for Marylanders who dine out, as well as for food service providers."

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