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Sysco lawyers prepare to take FTC to court

Mar 12, 2015, 8:48am CDT

Chris Shinn

Sysco would dramatically increase its distribution network if it is allowed to acquire US Foods.

Nora Olabi

Digital associate editor -Houston Business 

After the Federal Trade Commission blocked Houston-based Sysco Corp.'s (NYSE: SYY) $8.2 billion merger with Rosemont, Illinois-based US Foods for allegedly violating antitrust laws, Sysco is preparing for its next move.

Sysco denies that the merger breaks antitrust or anticompetitive regulations. Sysco lawyers are going through the FTC's report and plan to fight its allegations in court. A firm representing Sysco is Washington, D.C.-based law firm O'Melveny & Myers, according to the Houston Chronicle.

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Sysco to sell 11 distribution centers contingent on US Foods merger

Sysco names new president of subsidiary

Last month, the FTC filed an administrative complaint charging the proposed deal would violate antitrust laws. The FTC blocked the Sysco-US Foods merger 3-2, saying it would be anti-competitive because Sysco would have 75 percent of the market share after the merger.

The FTC claimed the deal would significantly reduce competition nationwide and in 32 local markets for broadline foodservice distribution services. The FTC alleges that the lack of competition could lead to increased prices and diminished services for customers.

However, Sysco believes that the FTC has an "erroneous view of the competitive dynamics of the foodservice distribution industry," the company said in a statement

In its view, the combined Sysco-US Foods entity would have about 25 percent of the market share of the $238 billion food-service industry.

Sysco expects to save about $600 million a year within three to four years from the deal due to supply-chain efficiencies, merchandising activities and overlapping general and administrative functions.

Read more about the merger in HBJ's 2014 Deals of the Year publication.

Sysco is the fifth-largest Houston-area public company, reporting $44.4 billion of fiscal year 2013 revenues, according to Houston Business Journal research.

Nora is the digital associate editor for the Houston Business Journal. Follow her on Twitter for more.

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