Sysco Corp., the nation’s largest food distributor, said Monday profits topped expectations in its fiscal first quarter, but that its purchase of US Foods won’t close this year as had been expected.
Sysco said the Federal Trade Commission is still reviewing the $3.5 billion US Foods deal. It agreed to buy the company in December in the first place and originally expected to complete the deal during the third quarter of this year, but later Sysco said the deal might close during the fourth quarter. Now it has been postponed even more.
“Given the amount of work remaining, and considering the upcoming holidays, the company does not currently expect to complete the transaction before the first quarter of 2015,” Sysco said in a statement on Monday.
In the meantime, the company is in talks with the No. 3 distributor, Blackstone Group-owned Performance Food Group, about selling it certain assets so it can gain regulatory approval, a source with direct knowledge of the situation said. Performance Food Group could make it much harder for Sysco to complete its merger if it does not buy the assets, since the Federal Trade Commission likely sees it as the only viable buyer of assets it will force Sysco to divest, sources said.
The Houston company said it earned $278.8 million, or 47 cents per share, in the three months that ended Sept. 27. Excluding one-time merger and acquisition expenses and other non-recurring costs, Sysco said its net income totaled 52 cents per share. Its revenue grew to $12.45 billion.
Analysts expected net income of 50 cents per share and $12.36 billion in revenue, according to Zacks Investment Research. The company said it faced higher food costs in meat, dairy and seafood.
“We are pleased with the solid operating performance we delivered in our first fiscal quarter in the midst of ongoing challenging market conditions,” CEO Bill DeLaney said in a statement. “While we were challenged with expense management in certain aspects of our business, we generated two percent case volume growth and managed acute inflationary pressure very effectively.”
Sysco shares have risen almost 7 % since the beginning of the year, while the Standard & Poor’s 500 index has climbed 9%. All in all the stock has climbed 18 % in the last 12 months.