Judge’s Ruling May Kill Sysco-US Food Merger

A federal judge’s ruling sided with the FTC and may stop the merger of the two largest food distribution companies in America
Wikicommons/ Aus Firemen

The $3.5 billion dollar purchase may have to be scrapped after a judge’s ruling.

A federal judge’s ruling on Tuesday may kill Sysco Corporation’s attempt to purchase US Foods Inc and prevent the merger of the two largest food companies in America.

U.S. District Court Judge Amit Mehta granted a preliminary injunction, which prevents the two companies from merging until legal proceedings are concluded. A redacted version of the judge’s order is scheduled to be released on Friday.

The ruling is viewed as a win for the Federal Trade Commission, which filed a lawsuit to block the $3.5 billion purchase back in February.

The FTC’s opposition to the merger stems from a concern that the largest food distribution company buying the second largest isn’t good for the public.

“The takeover would eliminate competition between the two companies that dominate the industry,” explained insidetrade.co. “That would lead to higher prices for customers including school cafeterias as well as restaurants and hotels. The costs would then be passed on to consumers,” 

Sysco, which had been preparing for this outcome, is reportedly “extremely disappointed” and will consider their options as they figure out what happens next. If the plan does fall through, US Foods is entitled to a $300 million breakup fee from Sysco, reports the Chicago Tribune.

It’s unclear if the two companies will try to fight the ruling by attempting to further remedy antitrust concerns, or if they will scrap the deal altogether, according to Forbes.

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