Sysco ends attempt to merge with US Foods

Sysco said today that it would halt efforts to merge with US Foods after the deal was suspended last week by a federal court judge.

"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."

He pledged the company’s commitment to serving foodservice customers as a partner and to pursuing the interests of both customers and stockholders through supply-chain innovations.

Dropping the merger will cost Sysco $300 million in break-up fees to US Foods and $12.5 million in contract obligations to Performance Food Group. Sysco had agreed to sell some US Foods assets to PFG after a merger was consummated. The divesture of distribution houses in 11 markets was intended to allay regulators’ concerns that the combination of the Sysco, the industry’s No. 1 distributor, and US Foods, the No. 2 player, would constrain trade and elevate the prices paid by onsite foodservices and restaurants for supplies.

As a result of dropping the attempt at the $8.2-billion merger, Sysco said it would also redeem $5 billion in merger-related debt. The company agreed in December 2013 to buy US Foods from an investment group for $500 million in cash, $3 billion in Sysco stock and the assumption of $5 billion in debt.

US Foods had not publicly commented on Sysco’s decision as of posting time.