A merger between food distributors Sysco and US Foods has collapsed just days after the Federal Trade Commission won a preliminary injunction blocking the deal.
Sysco’s $3.5 billion bid to buy US Foods is off after U.S. District Court Judge Amit Mehta last week granted the FTC’s request to put the brakes on the deal, citing concerns over how it would affect the restaurant business and consumers.
Sysco will be required to pay $300 million in so-called break-up fees to US Foods. It’s not uncommon for companies to put such fees into their tentative merger deals to ensure there are incentives to finalize a transaction.
“After reviewing our options, including whether to appeal the Court’s decision, we have concluded that it’s in the best interests of all our stakeholders to move on,” Sysco CEO Bill DeLaney said in a statement. “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.”
Want to publish your own articles on DistilINFO Publications?
Send us an email, we will get in touch with you.
Sysco shares (SYY) have been relatively stable in recent weeks, even ticking up slightly in pre-market trading this morning, signaling that investors expected bad news.
Critics of the merger had expressed concerns that the deal would make it easier for the combined companies to charger higher prices to restaurants, which could pass those costs along to consumers in the form of higher menu prices.
Because the deal fell apart, a related transaction in which US Foods had agreed to sell facilities in 11 markets to Performance Food Group is also off. US Foods will pay PFG $12.5 million.
To ease the blow on investors, Sysco said it would spend an additional $3 billion on share buybacks over the next two years.
Date: June 29, 2015