With the recent cancellation of the merger with USA Foods, Sysco will also put a stop to a related deal, aimed at selling a part of USA Foods’s assets to the Performance Food Group that was meant to appease antitrust concerns.
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Additionally, Sysco announced that its board has authorized the company to spend $3 billion in order to buy back shares over the next two years.
The company’s chief executive, Bill DeLaney said that after analyzing its options, involving whether to appeal the decision of Judge, they has determined moving on is the best of all options.
“We believed the merger was the right strategic decision for us, and we are disappointed that it didn’t come to fruition”, said DeLaney. “Our unprecedented momentum is going to propel us farther and faster forward”.
Goldman Sachs was the biggest loser when two food distributors had to give up their mega-merger.
Sysco’s decision came days after a judge delayed the merger by granting a request by the Federal Trade Commission for a preliminary injunction that would keep the deal at bay, pending a lawsuit.
Sysco said it will continue to drive earnings through commercial and supply chain initiatives, including category management and revenue management in its core business, as well as by pursuing cost-saving opportunities. At the time the merger was announced, the transaction was to bring together Sysco, a food distributor with $44 billion in sales to restaurant, health care, educational, lodging and other customers with U.S. Foods, a food service supplier with $22 billion in annual sales. Reuters reported that according to the deal, Sysco will pay a breakup fee of $300 million to United States Foods.
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On Monday, shares of Sysco fell 2.2% to $37.54 in 4 p.m. trading on the New York Stock Exchange. Sysco, the food-distribution company now has to formulate a fresh strategy for the future acquisitions and is most likely to go in for smaller deals. “While we anticipate the possibility that our credit rating may be downgraded as a result of this new share repurchase program, we are comfortable operating our company with higher levels of debt”. This way, the giant company tries to stay strong in front of rivals that have “more natural-and-organic items and online ordering”.
