2nd UPDATE: Whole Foods, FTC Settle Wild Oats Merger Dispute
March 06 2009 - 9:57AM
Dow Jones News
Whole Foods Market Inc. (WFMI) has reached a settlement with the
U.S. Federal Trade Commission to resolve the agency's antitrust
challenge to the organic grocer's 2007 acquisition of rival Wild
Oats Markets Inc.
In a settlement announced Friday, Whole Foods agreed to sell 32
Wild Oats stores in 12 states, including 19 that already have been
closed.
In exchange, the FTC will drop its legal bid to undo the merger.
The commission had argued that the merger would lessen competition
in the market for natural and organic foods.
"As a result of this settlement, American consumers will see
more choices and lower prices for organic foods," FTC Chairman Jon
Leibowitz said in a statement. "It allows the FTC to shift
resources to other important matters and Whole Foods to move on
with its business."
Whole Foods Chief Executive John Mackey said in a statement, "We
are pleased to have reached a mutually-satisfactory agreement with
the FTC."
"We believe it was in the best interests of all our stakeholders
to resolve this matter so we can dedicate our full attention to
selling the highest quality foods available in our inviting store
environments," Mackey said.
Whole Foods said that of the 19 already-closed stores it must
sell, 10 stores were closed by Wild Oats before the merger and
another nine were shuttered by Whole Foods after the merger was
completed.
Twelve of the 13 active grocery stores Whole Foods must sell are
former Wild Oats stores.
Mackey said it would be "business as usual" at the 13 operating
stores while they are being prepared for sale.
The active stores up for sale had combined sales of $31 million
in the first quarter of fiscal 2009, about 1.3% of Whole Foods'
total sales of $2.5 billion, the company said.
Whole Foods said it expects to record a non-cash charge of
approximately $19 million relating to the potential sale of the
operating stores.
The FTC said that requiring Whole Foods to sell the 32 stores
would restore competition in 17 geographic markets.
Under the terms of the agreement, a divestiture trustee will be
in charge of selling the stores and will have six months to find
one or more buyers, who must be approved by the FTC. The trustee
can seek additional time to sell the stores.
The commission said the stores represent a significant portion
of the Wild Oats locations that Whole Foods acquired, and is
currently operating as well all of the formerly operating Wild Oats
stores for which leases still exist.
Over the last two years, the dispute between Whole Foods and the
FTC saw several twists and turns that made the case unlike most
merger challenges in which antitrust concerns are resolved before
companies decide to close a deal.
Whole Foods closed its Wild Oats acquisition in August 2007
after a federal judge rejected the FTC's initial attempt to block
the merger, but a federal appeals court overturned that ruling a
year later and revived the commission's case, throwing the deal
into a state of uncertainty.
The two sides had been in settlement talks since late January.
At the same time, the FTC was preparing to hold a full
administrative trial on the legality of the merger in April.
-By Brent Kendall, Dow Jones Newswires; 202-862-9222;
brent.kendall@dowjones.com