Whole Foods finally has its way

MMR, Sept 10, 2007

AUSTIN, Texas -- Whole Foods Market Inc. was able to complete its takeover of rival Wild Oats Markets Inc. late last month after a federal appeals court rejected the Federal Trade Commission's argument that the deal violated antitrust regulations.

"While this merger has taken longer than we anticipated, we are very excited to now begin the integration process," Whole Foods chairman, chief executive officer and cofounder John Mackey stated. "Our companies have similar missions and core values, and we believe this merger will create long-term value for our customers, vendors and shareholders as well as exciting opportunities for our new and existing team members."

The $565 million merger between Whole Foods and Wild Oats that was announced in February had been on hold since the FTC filed a lawsuit in June that sought to block the merger on antitrust grounds.

Last month a federal court in Washington agreed to take one last look at the merits of the FTC's request for an injunction to block the deal.

On August 24 a three-judge panel upheld a lower court's ruling that found the merger of two of the nation's largest natural and organic food merchants would not curb competition and raise prices.

In his 93-page ruling, district court judge Paul Friedman said that the market for natural and organic products was not limited to just Whole Foods and Wild Oats, noting that consumers can purchase such items from a wide variety of retailers.

In its appeal to the appellate court FTC lawyers argued that Friedman had "utterly ignored the bulk" of its case, including internal statements by Mackey in which he expressed a desire to crush the competition and that by buying Wild Oats, Whole Foods would be able to avert price wars and deter a major grocery chain from creating a competing natural food products giant.

The combination of Whole Foods and Wild Oats creates a company with about 300 stores across the country. As part of the agreement to merge the companies, Whole Foods has agreed to sell 35 of its Wild Oats stores.

Mackey says he expects it will take nearly two years to incorporate the remaining Wild Oats units into Whole Foods operations.

The result of the merger, he noted, will be a stronger and more efficient company.

"We have always benefited from learning from our past acquisitions and believe this merger will result in a company that is much stronger and better positioned for the future," he adds.