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Sysco Terminates Merger Agreement With US Foods

Last updated on June 13th, 2024 at 05:23 pm

Sysco Corp. has terminated its merger agreement with US Foods, days after the U.S. District Court in Washington, D.C., granted the Federal Trade Commission’s request for a preliminary injunction to block the proposed Sysco-US Foods merger. This action also terminates an agreement with Performance Food Group (PFG) to purchase US Foods facilities in 11 markets.

Under terms of the merger agreement, the termination of the transaction requires Sysco to pay breakup 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 CEO. “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 underscored Sysco’s confidence in its existing business with a collective focus on the highest levels of customer service and satisfaction, growing the business, reducing costs and generating substantial value for Sysco’s shareholders.

“Everything starts with the customer,” he said. “Our vision remains clear: to be our customers’ most valued and trusted business partner. If our customers succeed, then we succeed. Our relentless focus on providing exceptional customer service and differentiated solutions to help our customers grow is unwavering.”

Sysco’s board of directors has authorized the company to spend an additional $3 billion to buy back shares (approximately 13 percent of current outstanding shares at recent prices) over the next two years. The share repurchases will be in addition to the amount normally purchased to offset benefit plans and stock option dilution.

“While we are very comfortable leveraging our balance sheet to enhance returns to our shareholders, we remain committed to maintaining a solid investment-grade credit rating and a strong balance sheet,” DeLaney said. “A strong balance sheet provides the capacity and flexibility to continue to pursue strategic opportunities as they may arise. While we anticipate the possibility that our credit rating may be downgraded as a result of this new share repurchase program, we are comfortable operating our company with higher levels of debt.”

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The Shelby Report delivers complete grocery news and supermarket insights nationwide through the distribution of five monthly regional print and digital editions. Serving the retail food trade since 1967, The Shelby Report is “Region Wise. Nationwide.”

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