Sysco Corp. pulled out of a $3.5 billion acquisition of US Foods after a federal judge blocked the takeover. Sysco now faces a $300 million breakup fee payment to US Foods as well as $12.5 million fee to Performance Food Group, which had agreed to buy some US Foods facilities.
Sysco intends to buy back $3 billion in shares over the next two years.
The Federal Trade Commission in February said it would seek a court order to prevent a merger because it would “eliminate significant competition in the marketplace.”
Last week, U.S. Judge Amit Mehta issued the order blocking the deal. Sysco said earlier it likely would pull out of a deal if such an order was issued.
Sysco and US Foods together operate more than 13,000 trucks, which ranks them among the largest private fleets in the United States. Sysco ranks No. 2 and US Foods ranks No. 5 on the Transport Topics Top 100 list of the largest private carriers in the United States, Canada and Mexico.
A combined Sysco-US Foods would have created a national broadline food-service distributor with an estimated 75% share of the market for goods supplied to such large customers as restaurant and hotel chains, hospitals and schools, FTC said. The FTC said the deal would result in higher prices due to reduced competition.
Sysco had fought for more than a year to gain government approval for the transaction, arguing that the deal would bring $1 billion in savings, letting it offer lower prices to customers.