WASHINGTON, June 23 (Reuters) – Sysco Corp’s $3.5 billion merger with U.S. Foods should be stopped for further review, a federal judge ruled on Tuesday, handing a major victory to the USA government in its effort to block the controversial merger. Effectively, the judge’s comments are expected to scuttle the deal. A redacted version will be released Friday, according to the report.
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The injunction clears the way for the administrative trial, which is scheduled for July 21, 2015.
For his part, John Lederer, CEO of privately-owned United States Foods, expressed his company’s commitment to carrying on despite the ruling. At the heart of the FTC’s argument was fact that USA Foods and Sysco control 75 percent of that market.
Sysco and Rosemont, Ill.-based USA Foods are both closing units. Some investors overlook hedge funds because of the poor performance of funds in recent years, but our research proves that these poor results by hedge funds were because of reasons which have nothing to do with their stock picking ability.
Mr. Mehta’s ruling on Sysco can eventually sink its deal with U.S. Foods.
Sysco has been preparing for the possibility that the deal would be blocked. The company said that it would review its opinion; but a person stated in the forum that the giant food distributor would walk away from the promised deal. SYSCO’s profit margins have been low, but its cash flows, revenue, and valuations levels are its strengths, which in the case of its cash flow, it is trying to use to stimulate growth.
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“While we respect the court’s decision, we are profoundly disappointed with this outcome”, Sysco CEO Bill DeLaney said, in a statement. In the past, Sysco has used smaller acquisitions to grow its business. FTC’s main concern with the deal is the anti-trust issues which could arise if the companies combine to form a single entity. This work will be conducted in close collaboration with Sysco’s Board of Directors and the primary owners of U.S. Foods. The two firms together invested $2.25 billion in equity in 2007 to buy USA Foods, then known as USA Foodservice, from Dutch grocer Ahold for $7.1 billion, including debt.
