Sysco, the largest food supplier to restaurants and cafeterias in the US has been working on a master plan to partner with US Foods for almost two years. It wasn’t the luckiest endeavor, as a preliminary injunction was recently issued, putting a stop to the deal, as it could harm competitors. The Federal Trade Commission had filed a lawsuit this year, challenging the transaction on antitrust accusations.
Sysco and US Foods previously announced their 3, 5 billion merger two years ago, then they together invested on an integration plan that would be adequate to the government regulators. Their endeavors would have brought them $65 billion in annual revenue.
The FTC interfered with a decision to block the deal, stating that the merger could lead to higher prices and lower quality services for customers such as restaurants and schools.
In negotiations before the ruling in May, the two sides started a conflict over the scope of the market in which they both compete. Sysco and US foods claimed the commission was counting on a “tortured” analysis, meant to ignore the variety of distribution channels available to consumers.
The Chief executive of Sysco, Bill DeLaney, stated that after analyzing the existing options, meaning a consequent appeal to the judge’s decision, the company decided that it was best to move on. Sysco abandons plan to merge with US foods and is now focused on smaller acquisitions, following an initiative to cut $750 million in annual costs and efforts to upgrade its offerings and technology. This way, the giant company tries to stay strong in front of rivals that have “more natural-and-organic items and online ordering”. Sysco has a backup plan, which is something natural in the world of high class business.
Sysco already declared that its board of directors had authorized new acquisitions of $3 billion of its own stock over the next couple of years. This is an equivalent of 13% of its total shares outstanding at recent prices.
With the recent cancellation of the merger with US Foods, Sysco will also put a stop to a related deal, aimed at selling a part of US Foods’s assets to the Performance Food Group that was meant to appease antitrust concerns.
The entire team of investors responded with calming relief to the deal’s cancellation and Sysco shares already have already risen with 3,1% the day the transaction was halted by US District Judge Amit Metha. Overall, Sysco continues to stay down to 5.4% this year.
The Federal Trade Commission declared on Monday that the decision to abandon the merger “is a victory for both competition and consumers”.
Image Source: syscointermountain.com
