Sysco Corp-US Foods deal draws US regulators' scrutiny

January 17
7:41 AM 2014

The eyes of US regulators are drawn to Sysco Corp's $3.5 billion acquisition of US Foods due to antitrust concerns, Bloomberg reported. Some states are also joining a review undertaken on the deal over worries that it could weaken competition, the report added.

Sysco distributes food and related products mainly to the food service industry. It also provides personal care guest amenities, housekeeping supplies, room accessories and textiles to companies in the lodging industry, Bloomberg data showed.

US Justice Department Spokeswoman Gina Talamona said either the antitrust division of the Justice Department or the US Federal Trade Commission will be evaluating the deal. She added that no decision has been made about which among the two agencies undertake the probe.

In a phone interview, Indiana Attorney General Spokesman Greg Zoeller told Bloomberg, "We are aware of the merger and are working with other states as we examine the potential impact in Indiana. He did not say if other states were also involved nor did he comment on the specifics of the review.

Last month, Sysco and US Foods, a closely-held firm, unveiled that they would be merging in order to form a "world-class food-service company," the report said.

Based in Houston, Sysco is the largest food distributor to restaurants in North America. Including US Foods, a company headquartered in Rosemont, Illinois to its operations would give Sysco the meat brand Cattleman's Selection as well as the dessert brand Devonshire. The consolidated firms is estimated to post annual sales of around $65 billion, the report said.

To push through with the purchase, Sysco was able to get financing commitment worth $4.75 billion from Goldman Sachs Group Inc. The food company will pay $3 billion using common stock and cash worth $500 million to the owners of US Food which include KKR & Co and Clayton, Dubilier & Rice LLC, both private equity companies, the report said. 

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