Sysco terminates $3.5 billion US Foods buyout as it faces regulatory scrutiny

Sysco is scrapping its proposed $3.5 billion buyout of US Foods after a Federal Trade Commission legal victory that temporarily blocked the deal to combine the two food-service companies.

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The FTC opposed the deal, saying it would reduce competition. The U.S. District Court in Washington, D.C., granted the halt on Tuesday.

The end of the deal will cost Sysco. It will pay $300 million to US Foods and $12.5 million to another company, Performance Foods Group, in breakup fees. Performance Foods had a deal to buy 11 US Foods facilities in 11 markets.

Beaumont, Texas-based Sysco's shares rose 1.6 percent to $39 in premarket trading. Rosemont, Illinois-based US Foods is jointly owned by the investment forms Clayton, Dubilier & Rice LLC and Kohlberg Kravis Roberts Co. L.P.