Sysco Corp today (June 29) announced it has terminated its merger agreement with US Foods, days after the U.S. District Court in Washington granted the Federal Trade Commission's request for a preliminary injunction to block the proposed merger.
The decision ends a year and a half of fighting by the food distribution giant to get the merger approved. In December 2013, Sysco announced the deal to buy US Foods for $3.5 billion, but it immediately met with competition and antitrust concerns. The FTC filed a lawsuit in February challenging the transaction on antitrust grounds.
The action also terminates an agreement with Performance Food Group (PFG), in which Sysco was to purchase US Foods facilities in 11 markets.
Under terms of the merger agreement, the termination of the transaction requires Sysco to pay break-up fees of $300 million to US Foods and $12.5 million to PFG.
"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."
DeLaney said Sysco would pursue smaller acquisitions. The company's board also authorized the repurchase of $3 billion of its own stock over the next two years, equal to about 13 percent of shares outstanding.