Posted on 08/28/2007 6:59:24 PM PDT by Dysart
DALLAS (AP) — Whole Foods Market Inc. said Tuesday it has lined up financing to complete its $565 million purchase of rival organic and natural foods grocer Wild Oats Markets Inc., ending a six-month battle against federal regulators who tried to block the deal on antitrust grounds.
The company said it took out a five-year, $700 million loan to fund the deal, which also includes the assumption of $137 million in Wild Oats debt.
"While closing this merger has taken longer than we anticipated, we are very excited to now begin the integration process," Whole Foods Chief Executive John Mackey said. He said the deal "will result in a company that is much stronger and better positioned for the future."
The fight to buy Wild Oats was bruising, and both Mackey and the FTC emerged from the fight with black eyes, according to former FTC officials and analysts.
For antitrust regulators, Whole Foods is the latest in a string of setbacks in their attempts to prevent acquisitions that they believe hurt competition.
And Mackey's image was damaged when it was discovered that he made anonymous comments on financial Web sites touting his company's stock while denigrating Wild Oats as being poorly managed and overpriced. The Securities and Exchange Commission is informally investigating the postings.
In court documents, the FTC also released the content of internal company memos that portrayed Whole Foods as a voracious competitor eager to eliminate a rival and keep prices high. In one note to his board, Mackey said buying Wild Oats would allow his company to avoid "nasty price wars" in several cities where the chains compete.
Joseph J. Simons, a former top antitrust official at the FTC, said regulators became obsessed with Mackey's comments and failed to build a winning case based on economic analysis.
"It's nice to have the executives saying helpful things for your case," Simons said, "but if everything else goes the other way, that's not enough. They have to pay more attention to the economic evidence."
Simons said Whole Foods' victory will make other companies fight more aggressively when regulators try to block acquisitions.
Joseph Winterscheid, a Washington antitrust lawyer, said FTC officials "had some hot documents" that they thought gave the commission the upper hand.
"Companies faced with hot documents will very often cave," Winterscheid said. "This time, they didn't blink."
The agency's defeat over Whole Foods comes after FTC and Justice Department regulators also tried and failed to stop other recent deals, including Oracle Corp.'s hostile takeover of PeopleSoft Inc.; Arch Coal Inc.'s acquisition of Triton Coal Co.; and Western Refining Inc.'s purchase of rival Giant Industries Inc.
In the Whole Foods-Wild Oats case, FTC regulators focused on the two chains' dominance in the organic and natural foods market. Whole Foods countered that it faced plenty of competition from Kroger Co., Safeway Co. and other big supermarket chains that have expanded their offerings of organic food.
U.S. District Judge Paul L. Friedman ruled for Whole Foods, saying that about 60 percent of natural and organic foods are sold by conventional grocery stores.
Whole Foods had vowed to complete the purchase of Wild Oats quickly after getting a green light from the courts. This week, it did just that.
The Austin-based company announced late Monday that its tender offer had succeeded in winning 84.1 percent of Wild Oats shares at $18.50 apiece, and that another 12.7 percent of Wild Oats shares were subject to guaranteed delivery by midweek. It will acquire the remaining outstanding shares under merger procedures of Delaware law, where the company is incorporated.
Standard & Poor's Rating Services cut Whole Foods debt below investment grade because of the borrowing used to finance the acquisition.
Whole Foods shares lost 99 cents, or 2.2 percent, to $44.76, and Wild Oats shares rose 2 cents to the deal price of $18.50.
Boulder, Colo.-based Wild Oats has about 110 stores and annual sales of about $1.2 billion, compared to Whole Foods' $5.6 billion. Whole Foods plans to sell 35 Henry's and Sun Harvest stores and evaluate the fate of each Wild Oats outlet.
Mackey said buying Wild Oats would lead to "significant" cost savings and greater purchasing power, but some industry observers remained skeptical.
"They get some additional store locations at probably a reasonable price versus building them, but I'm not convinced that this is a marriage made in heaven," said W. Frank Dell II, a grocery consultant based in Connecticut.
Dell predicted Whole Foods will close many smaller Wild Oats locations.
He also doubted that the flap over Mackey's e-mails would hurt the chain's business.
"Shoppers don't care unless the chairman goes to jail," he said. "This guy is obviously a visionary. He has a lot of creative talents, and that served him well when he had a small company. Now he's got a big company."
A little background: http://www.freerepublic.com/focus/f-news/1864540/posts
Whole Frauds, Old Oats? Anyone have anything interesting to post?
How bout you post something interesting. Let me know.
Well, I buy from the bakery exclusively and extensively. Wouldn’t purchase anything else. Other than that, I enjoy taking in the atmosphere of the store, where, apparently,one must have 9 tattoos and or piercings minimum and be sporting a goatee to be employed there— and that’s just for the females.
A year or so ago an MIT student wrote a piece in a student publication about a visit she made to a Whole Foods store.After describing her visit in some detail she said that she's convinced that shopping at Whole Foods isn't about health but,rather,about the display affluence.
Not that that applies to *you*.....
she’s right.
i watched a fashionable woman dump $500.00 for a basket of groceries at clark’s health foods in rancho mirage/palm desert.
I dunno, “affluence” isn’t what springs to mind when I shop there. I find the patrons quite earthy and low-key. Maybe the WF demographics are different down here.
To confirm or refute this girl's conclusion (and my own suspicions) I just spent a few minutes on their website doing a store location search.I found that the only two WF stores located in Connecticut are in West Hartford (quite rich) and Greenwich (obscenely rich).I personally know that the WF stores in Massachusetts are either in very rich areas,"trendy" areas or college towns.And a quick check of one or two other states showed stores located in towns/areas that I know to be rich and/or "trendy" (e.g.,Los Altos,Los Gatos and Palo Alto,CA...all *very* rich *and* trendy).
So the demographics very possibly could be different in your neck of the woods.
You’re right about Whole Foods opening stores only in affluent (and liberal) areas in New England. They’re opening their first store in New Hampshire (Nashua) in a year or two, and it’ll be larger than any of their MA stores, at 55,000 sq ft. Which means that my neighbors are much richer than they appear, and New Hampshire is now completely a blue state.
It was the only grocery store I could find in Monterey CA....I don’t recall it being quite that expensive...
There must be some good Wild Oats jokes though.
I knew it was completely blue on Election Day 2006 with those two filthy Communists that the voters elected to the House.
the Wild Oats here is in the poshest area of Nashville
it is also lib heaven....nauseatingly so
Whole Foods is building one a half a block away as we speak....wonder what will happen to either...can’t imagine them wanted both open
I can get some neat things in bulk at reasonable prices there which are difficult to find in other brick and mortar stores. On the other hand there is stuff that is cheap in bulk at megasupermarkets but sells for stunningly high prices at Whole Foods in little bitty containers.
As for the personnel, yeah there is a high recycled hippie content.
Plucking up (instead of sowing) wild oats?
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