After months of battling with federal regulators – including contentious meetings, a lawsuit and a federal injunction – food distributor Sysco has dropped its plan to merge with rival U.S. Foods.
Reuters reports that Sysco – the largest food distribution company in the U.S. – canceled the proposed $3.5 billion deal that would have given the combined venture 25% of the food-service supply business in the country.
Sysco says it decided to scrap the merger with the No. 2 foodservice distributor in the U.S. after determining it was in the companies’ best interests to cut their losses and move on.
“We believed the merger was the right strategic decision for us and we are disappointed that it did not come to fruition,” Bill DeLaney, Sysco president and CEO said.
By canceling the deal, Sysco is required to pay a $300 million break-up fee to U.S. Foods. Additionally, the company must pay another $12.5 million to a second company that had agreed to purchase 11 facilities that Sysco had planned to sell to gain approval from regulators, Reuters reports.
The deal has been marred with issues since it was first proposed back in December 2013. Regulators weren’t shy in expressing their concerns that the merger would be bad for the companies’ customers – food service institutions ranging from the most humble snack bars to the fanciest restaurants.
Back in February, the FTC sued to stop the merger, and last week a federal judge issued a preliminary injunction blocking it.
The companies are the two biggest suppliers in the United States, and are considered “broadline distributors” that can supply just about everything a foodservice establishment might need, from frozen ravioli to napkins to ketchup packets.
Food distributor Sysco drops plan to merge with US Foods [Reuters]
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