Sysco Corp. has terminated its merger with U.S. Foods Inc., the company said Monday, 18 months after the $8.2 billion proposal to combine the two largest food distributors rocked the foodservice world.
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Sysco’s decision comes days after a US district court in Washington, DC approved the FTC’s request to block the combination of the two companies over concerns the transaction would hurt competition in the market.
Coming on the heels of the DOJ’s successful opposition to the Applied Materials/Tokyo Electron merger 16 and the Comcast/Time Warner deal17 as well as the FTC’s recent decision to challenge the Steris/Synergy merger, 18 it is clear that the U.S. agencies are very willing to bring challenges and are more confident than ever of their ability to obtain blocking injunctions in court. Charter was only able to swoop back in to make a successful bid for Time Warner Cable because Comcast was forced to walk away from its deal. On Monday, DeLaney said in an interview that they have turned the page through discarding the deal. We also think the potential for higher customer retention, the ability to better serve customers, and improved reporting stand to prop up revenue and limit unnecessary expenses when this effort has been fully launched across the firm’s operating network. The company is focused on the highest levels of customer service and satisfaction.
DeLaney however remained combative, saying Sysco is still looking to grow, adding: “We definitely believe that there is plenty of acquisition opportunity out there”. But, it still stings to lose out on $US35 million.
By terminating the deal, Sysco must pay a $300 million break-up fee to U.S. Foods.
The share buyback plan is additional to the prior plan, which was geared to offset stock option dilution and benefit plans. Shares are down 3.3% in the year so far, while the S&P 500 has gained 2.1%.
Delaney emphasized that Sysco remained committed to maintaining a solid investment-grade credit rating and strong balance sheet.
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Sysco, the U.S. biggest supplier of food and other provisions to cafeterias and restaurants, has been operational on the merger for above a year and a half before the federal judge put a ban on the deal.
