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.

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

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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.