Alas, Sysco Corporation’s USD 3.5 billion plan to take over U.S. Foods is no more, with the major food-distributor vowing instead to purchase USD 3 billion of its own stock over the next two years, equivalent to 13 percent of its total outstanding shares.
Sysco will have to pay a USD 300 million termination fee to U.S. Foods and a USD 12 million termination fee to Performance Food Group – which was set to buy some of U.S. Foods’ facilities – for calling off the deal, adding to the USD 355 million the company has already lost to merger-related costs since March. After reviewing the parameters of the deal following a federal judge’s ruling against the merger, Sysco decided it was in the best interest of company stakeholders to pursue alternative initiatives and acquisitions.
“We are prepared to move forward with initiatives that will contribute to the success of Sysco and our stakeholders,” said Sysco Chief Executive Bill DeLaney in a statement.
“We will continue to make prudent investments in our business,” DeLaney added.
A preliminary injunction against the deal had been filed by U.S. District Judge Amit Mehta on 23 June, siding with the Federal Trade Commission (FTC), which filed an antitrust lawsuit against the acquisition in February. Mehta was concerned that the merger of the rival companies would seriously hinder competition.
“The Court's ruling…will preserve competition in both local and national broadline foodservice distribution markets,”said Debbie Feinstein, director of the FTC’s Bureau of Competition, last week.
Moving forward, Sysco anticipates sidestepping more than USD 750 million in annual product and operating costs via its new stock buyback plan.
