FTC to Block Whole Foods, Wild Oats Merger

The Federal Trade Commission (FTC) said Tuesday it will file a lawsuit to block Whole Foods Market, Inc.'s proposed acquisition of its smaller rival Wild Oats Markets, Inc.
 
"We are very disappointed by this decision and we intend to vigorously challenge the FTC in court," said John Mackey, Whole Foods' chairman and chief executive officer. Both Whole Foods and Wild Oats said they will fight the legal challenge.
 
Austin, Texas-based Whole Foods agreed to acquire Wild Oats in February for $18.50 a share, or roughly $565 million. The deal was expected to close in April, but the transaction was delayed by FTC requests for more information.
 
The FTC will ask the U.S. District Court of the District of Columbia to enter a temporary restraining order that would prohibit Whole Foods from completing its acquisition of Wild Oats pending a ruling on its request for a preliminary injunction.
 
Whole Foods said the FTC's challenge to the proposed merger is "based on its contention that the relevant antitrust product market is limited to natural and organic food stores and excludes other supermarkets." Whole Foods said FTC's position is contrary to its position in past merger reviews, where its definition of supermarkets has included conventional supermarkets as well as Whole Foods Market and Wild Oats.
 
"The FTC has failed to recognize the robust competition in the supermarket industry, which has grown more intense as competitors increase their offerings of natural, organic and fresh products, renovate their stores and open stores with new banners and formats resembling Whole Foods Market," Mackey said. "Evidently the FTC does not appreciate the many benefits for consumers of the proposed merger, including our plan to invest capital in and improve many of the stores currently owned by Wild Oats."
 
Greg Mays, chairman and chief executive officer of Wild Oats, based in Boulder, Colo., said in a statement that the merger "is in the best interest of all our constituents," and that consumers will benefit from a "stronger product offering and the capital investment to upgrade our stores. We intend to cooperate with Whole Foods in all respects and to vigorously challenge the FTC in court," Mays said.
 
Wild Oats reported more than $1.2 billion in annual sales. The company currently operates 110 natural food stores in 24 states and British Columbia, Canada. The company's markets include: Wild Oats Marketplace, Henry's Farmers Market, Sun Harvest and Capers Community Markets.
 
Whole Foods, founded in 1980 in Austin, Texas, had sales of $5.6 billion in fiscal year 2006 and currently has 194 stores in the United States, Canada and the United Kingdom. The company is opening its flagship store in London Wednesday, signaling aspirations to expand the Whole Foods concept into Europe.