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Friday, January 31, 2014

Sticker shock key to antitrust approval for Sysco, US Foods deal, (NYSE: SYY)

The antitrust battle over whether food giant Sysco Corp will be allowed to purchase rival US Foods Inc will likely focus on whether the merger will drive up costs for thousands of restaurants, hospitals and hotels that they supply on nationwide contracts. The Federal Trade Commission will examine Sysco's $3.5 billion deal to buy debt-ridden US Foods from private equity, which was announced in December and would combine the only two food suppliers with a nationwide reach.While the review is in early stages, the mega-merger has already rattled customers who rely on the companies for everything from pre-scrambled eggs for school meals to truffle mousse desserts for high-end restaurants.One source said some restaurants and school districts have begun to discuss how to oppose it, and hospital food providers are "buzzing" about the proposed transaction, according to a second source.The main concern is that national buying groups that negotiate for perhaps hundreds of hospitals or hotels will no longer be able to play Sysco and US Foods off against each other to get the best contracts for their members.

Sysco Corporation (Sysco), along with its subsidiaries and divisions, is a North American distributor of food and related products primarily to the foodservice or food-away-from-home industry. Shares of SYY fell by 0.2% or $-0.07/share to $35.08. In the past year, the shares have traded as low as $30.63 and as high as $43.40. On average, 5103600 shares of SYY exchange hands on a given day and today's volume is recorded at 3961442.