Sysco said it will not proceed with attempts to buy US Foods in the wake of last week’s decision by a federal court to halt the merger at least temporarily.
Ending the pursuit of US Foods, Sysco’s closest competitor, will cost the restaurant industry’s largest distributor $312.5 million in break-up fees. The bulk of that--$300 million—will be paid to US Foods. The remainder will be paid to Performance Food Group, the No. 3 foodservice distributor. To allay regulators’ concerns about constraint of trade, Sysco had promised to sell certain assets of US Foods to Performance.
Sysco added that it will begin redeeming $5 billion in merger-related debt. The company had agreed to acquire US Foods from a group that included Clayton, Dubilier & Rice LLC and Kohlberg Kravis Roberts & Co. L.P. for about $500 million in cash, Sysco stoke worth $3 billion and the assumption of $5 billion in debt. Sysco said it expects to redeem the debt within 40 days.
"After reviewing our options, including whether to appeal the Court's decision, we have concluded that it's in the best interests of all our stakeholders to move on," said Bill DeLaney, Sysco president and chief executive officer. "We believed the merger was the right strategic decision for us, and we are disappointed that it did not come to fruition. However, we are prepared to move forward with initiatives that will contribute to the success of Sysco and our stakeholders."
The agreement to merge the two largest foodservice distributors was announced on Dec. 9, 2013.
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