U.S. Senators seek antitrust scrutiny of deal to buy KKR-backed U.S. Foods

Target: U.S. Foods

Price: $3.5 bln

Buyer: Sysco Corp

Seller: KKR & Co

In a letter obtained exclusively by Reuters, Senators Amy Klobuchar and Mike Lee, the chairwoman and ranking member of the Senate’s antitrust subcommittee, said the deal being investigated by the Federal Trade Commission “raises important competition issues the commission should carefully review and closely scrutinize.”

In the letter, sent on Friday to FTC Chairwoman Edith Ramirez, the lawmakers said they took no position on whether the FTC should try to block the deal.

Sysco and U.S. Foods are the only companies with the geographic reach to offer nationwide contracts to deliver a wide variety of goods from napkins to eggs to cleaning supplies for customers ranging from hotel chains to fast food restaurants.

Sysco and U.S. Foods, which is owned by private equity companies including KKR & Co, announced the $3.5 billion deal in December.

Sysco has defended the merger by saying that there was intense competition from smaller competitors.

But the lawmakers were concerned about the loss of one of the only two companies with national reach.

“Critics contend that regional broadline food service providers lack the scale to be able to competitively price against Sysco and US Foods, that switching costs for customers could be high, and that piecing together regional companies is inefficient and would not outweigh the benefits,” the letter said.

Sysco declined comment on the letter and the FTC could not immediately be reached for comment.

Reporting by Diane Bartz of Reuters news service.