The U.S. Federal Trade Commission (FTC) has filed a lawsuit to block the merging of Sysco and US Foods Inc., (which is owned by private equity companies including KKR & Co.) the two largest food distribution companies in the country.
The controversial $3.5 billion merger deal which was announced in December 2013, would combine the only two companies in the country able to offer and fulfill nationwide contract to deliver foods to restaurants, hospitals and hotels.
The FTC claims that the merger would eliminate competition within the market, and would create higher prices for customers that would need to order all food and supplies from a single distributor. In an attempt to alleviate the FTC’s concerns, Sysco and US Foods offered to sell 11 distribution centers with sales of $5 billion, creating a new independent business, Performance Food Group, in order to maintain competition within the industry. However, the FTC rejected the offer as inadequate.
Sysco denies any claims that the merger would hamper or deny customers access to their choice of food distribution, and has stated it would fight the FTC’s action, hiring the law firm of O’Melveny & Myers LLP as its counsel.
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