(Adds comment from Sysco executive)
By Diane Bartz and Sruthi Ramakrishnan
Feb 2 (Reuters) - Food distributor Sysco Corp said it would sell 11 distribution centers run by takeover target US Foods Inc to far smaller rival Performance Food Group if skeptical antitrust regulators approve the merger with US Foods.
Sysco's $3.5 billion offer for US Foods has been pending approval from the Federal Trade Commission for over a year but is viewed as problematic given the dominance of both companies as suppliers to hospitals, hotel chains and restaurants.
Reuters reported on Friday that Sysco and US Foods had offered to sell 11 centers to win over the FTC.
Sysco, the largest U.S. food distribution company, and US Foods, which is No. 2, are the only companies with the reach to offer nationwide contracts for a broad range of foods, paper products and cleaning supplies.
In extensive talks with the FTC, Sysco said it has argued the deal would benefit customers.
"Unfortunately, the FTC has taken a different view of the potential competitive impacts of the merger," Sysco Chief Executive Bill DeLaney said in a statement. "We believe this divestiture package fully addresses its concerns."
Company executives and the five FTC commissioners are to meet this week and next to discuss Sysco's divestiture offer.
"If there's one thing that the FTC and we do agree on is that it's time to move this process forward," Delaney said in a conference call with industry analysts.
The distribution centers offered to Performance Group generated $4.6 billion in revenue in US Foods' latest fiscal year, Sysco said.
The facilities include three in California - Corona, San Francisco and San Diego - as well as centers in Denver, Kansas City, Kansas, Phoenix, Salt Lake City, Seattle, Cleveland, Las Vegas and Minneapolis.
Performance Food Group is owned by investment firm Blackstone Group LP.
Sysco also reported on Monday a 7.5 percent rise in quarterly sales to $12.1 billion, above estimates.
Sysco's net income fell 25 percent to $158 million, or 27 cents per share, in the second quarter ended Dec. 27, due to higher dairy and meat prices.
Excluding items, the company earned 41 cents per share, in line with Wall Street estimates. Analysts had expected revenue of $11.93 billion, according to Thomson Reuters I/B/E/S.
The company's share price had risen 14 percent since it announced the deal in December 2013 through last Friday's close. The shares were down 2.5 percent at $38.19 on Monday. (Reporting by Sruthi Ramakrishnan in Bengaluru and Diane Bartz in Washington; Editing by Don Sebastian, Meredith Mazzilli and Phil Berlowitz)