Business

Sysco plying FTC to save US Foods deal

Executives at Sysco, the nation’s No. 1 food supplier to restaurants and schools, are talking with government regulators in an attempt to save the company’s $3.5 billion purchase of US Foods, The Post has learned.

The Federal Trade Commission is expected to decide by Oct. 31 whether to sue to block the deal that would bring together the No. 1 and No. 2 food distributors in the country, sources said.

Deborah Feinstein, FTC’s Head of Competition, an influential voice in weighing whether or not to give the merger a regulatory green light, has told the FTC’s five commissioners she is ready to sue to block the deal unless certain conditions are met, a source said.

“She’s a very good, careful lawyer,” a well-placed DC source not working on the deal said. “If she’s recommending a case, they will bring a case.”

One source close to Sysco thinks there could be some wiggle room to save the deal.

“I’m not hearing that” Feinstein is set to block the deal, the source close to Sysco said Monday.

Critics of the deal feel the merger — which would give the combined company 25 percent of the food distribution market — grants the company too much power and would result in higher prices for the meat, produce, frozen and prepared foods, and napkins that are also delivered to health care facilities and cafeterias.

Sysco and privately held US Foods contend they face 15,000 competitors across the country and combining would reduce costs and instead lower prices.

There are issues with reaching a settlement, sources said.

Most of the companies’ contracts are at-will deals — that is, there are no long-term contracts binding distributor and customer.

That means it isn’t as easy to force either company to sell off specific sectors or geographic regions as it would be with a cable-TV deal.

“When you are dealing with warehousing and deliveries, it is not clear to me it can be solved,” a deal opponent said.

Sysco has pledged to divest operations with annual revenues totaling up to $2 billion — if required by the FTC.

If it demands divestitures, the FTC wants to see real buyers.

The regulator is very conscious that when approving Hertz’s 2012 deal for Dollar Thrifty it approved a deal contingent on selling Advantage Rent A Car to what proved to be a small operator that was not financially viable.

Advantage went bankrupt months later.

Sysco at this point has not proposed any divestitures, a source said.

Private-equity firms KKR and Clayton, Dubilier & Rice, which own US Foods, did not return calls. The FTC was not working Monday, a national holiday.

Sysco shares closed down 1.6 percent, to $36.44.