WASHINGTON--The top executive of Performance Food Group Inc. on
Thursday said his company would be in a position to become a
significant national competitor if its two larger rivals, Sysco
Corp. and US Foods Inc., are allowed to merge.
The federal court testimony from PFG Chief Executive George Holm
came on the third day of proceedings before U.S. District Judge
Amit Mehta, who is considering a challenge by the Federal Trade
Commission to the proposed combination of Sysco and US Foods, the
nation's top two food distributors.
The companies have sought to address antitrust concerns about
the merger by agreeing to sell 11 distribution centers to PFG that
generate $4.6 billion in revenue.
The FTC argues the concessions aren't enough to remove the
potential risk of higher prices to restaurants, hotels, schools and
other entities that buy food from distributors like Sysco and US
Foods.
Mr. Holm on Thursday said the assets would significantly boost
his company's geographic scope, and he outlined plans to build out
the company's food distribution capacity further beyond the
distribution centers it is in line to acquire.
Mr. Holm's testimony began Wednesday afternoon and took up most
of the court session on Thursday, longer than originally
anticipated and a signal that both sides view the executive's
statements as important to the case.
Mr. Holm said that after the Sysco-US Foods merger and the
divestitures to PFG, his company would be ready at the outset to
compete for business from large national customers. PFG would be a
competitor "that will be taken seriously," he said.
The executive, under questioning from a Sysco lawyer, also
sought to undercut the FTC's argument that PFG wouldn't be a
sufficient replacement distributor in the national market because
it would continue to have geographic gaps in its business, even
after the divestitures.
Mr. Holm said his company could service certain regions even
where distribution centers aren't close by. In some cases, PFG
saves money by concentrating its inbound purchases from food
manufacturers into fewer facilities, even if it means that delivery
trucks have to travel further to customers to deliver those goods,
he said.
Mr. Holm for a second day engaged in testy exchanges with FTC
lawyer Stephen Weissman, who frequently cited previous comments the
executive made during the agency's investigation of the merger. Mr.
Weissman said Mr. Holm previously indicated a marriage of Sysco and
US Foods would leave both national customers and local customers in
many markets vulnerable to price increases.
Mr. Holm acknowledged making the earlier statements and stood by
most of them in court, though occasionally he sought to further
explain or qualify his earlier views. He also said some of his
statements referred to the state of the market before PFG
negotiated the divestiture package with Sysco and US Foods.
Significant portions of Thursday's court proceedings took place
in a courtroom closed from public view because the testimony
involved confidential business information.
The hearing is expected to last seven days. Friday will feature
testimony from an economist who supports the FTC's views that the
merger is anticompetitive. The companies will present the bulk of
their defense next week.
Write to Brent Kendall at brent.kendall@wsj.com
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