By Angela Chen
Sysco Corp. has filed a memorandum opposing the U.S. Federal
Trade Commission's attempt to block its proposed $3.5 billion
merger with US Foods.
The company filed the memo Tuesday in the U.S. Federal District
Court for the District of Columbia. It claims that the merger,
which the FTC has said might violate antitrust regulations,
actually makes the food-service industry more competitive.
Sysco says that local markets are highly competitive and the
"FTC's flawed logic on the structure of the local food-service
distribution market led to dubious analysis of market share." For
example, the FTC claims that the combined company would control all
the market share in San Diego, but more than 24 companies compete
in the area.
"We look forward to presenting all of the facts in court and
ultimately, through this merger, delivering better service at a
lower cost through a more efficient, innovative and competitive
combined company," Chief Executive Bill DeLaney said in a news
release. The company added that synergies from the deal would
reduce Sysco's costs by $600 million annually, allowing for lower
prices, which contribute to a more competitive market.
Court hearings are set to begin May 5 on the Federal Trade
Commission's antitrust lawsuit against the merger of the nation's
two largest food distributors.
Sysco has been wrestling for more than a year with the Federal
Trade Commission over the acquisition, which would create a company
with more than 25% market share, before divestitures, in the
business of buying food and other supplies and selling these items
to restaurants, hospitals and other institutions.
Sysco has already agreed to sell 11 US Foods distribution
centers with a combined $4.6 billion in annual revenue to rival
Performance Food Group Co. That is more than double the $2 billion
in revenue that Sysco originally planned to divest to win
regulators' blessing.
The FTC has alleged the proposed tie-up would create a dominant
national company that could raise prices and reduce service for
restaurants, hotels, schools and other institutions that buy food,
paper products and a wide range of supplies from Sysco and US
Foods.
Shares of Sysco, inactive premarket, have been down about 5%
this year through Tuesday's close.
Write to Angela Chen at angela.chen@dowjones.com
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