Sysco Files Memo Opposing FTC Block of Merger


Sysco Corp. has filed a memorandum opposing the U.S. Federal Trade Commission's attempt to block its proposed $3.5 billion merger with US Foods.

The company filed the memo Tuesday in the U.S. Federal District Court for the District of Columbia. It claims that the merger, which the FTC has said might violate antitrust regulations, actually makes the food-service industry more competitive.

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Sysco says that local markets are highly competitive and the "FTC's flawed logic on the structure of the local food-service distribution market led to dubious analysis of market share." For example, the FTC claims that the combined company would control all the market share in San Diego, but more than 24 companies compete in the area.

"We look forward to presenting all of the facts in court and ultimately, through this merger, delivering better service at a lower cost through a more efficient, innovative and competitive combined company," Chief Executive Bill DeLaney said in a news release. The company added that synergies from the deal would reduce Sysco's costs by $600 million annually, allowing for lower prices, which contribute to a more competitive market.

Court hearings are set to begin May 5 on the Federal Trade Commission's antitrust lawsuit against the merger of the nation's two largest food distributors.

Sysco has been wrestling for more than a year with the Federal Trade Commission over the acquisition, which would create a company with more than 25% market share, before divestitures, in the business of buying food and other supplies and selling these items to restaurants, hospitals and other institutions.

Sysco has already agreed to sell 11 US Foods distribution centers with a combined $4.6 billion in annual revenue to rival Performance Food Group Co. That is more than double the $2 billion in revenue that Sysco originally planned to divest to win regulators' blessing.

The FTC has alleged the proposed tie-up would create a dominant national company that could raise prices and reduce service for restaurants, hotels, schools and other institutions that buy food, paper products and a wide range of supplies from Sysco and US Foods.

Shares of Sysco, inactive premarket, have been down about 5% this year through Tuesday's close.