Court refuses to delay Whole Foods-Wild Oats merger

by Josh Sosland
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WASHINGTON — A federal judge rebuffed a Federal Trade Commission bid to delay the proposed combination of the nation’s largest natural foods retailers on Aug. 16.

Judge Paul L. Friedman of the U.S. District Court for the District of Columbia denied the F.T.C. request for a preliminary injunction in connection with the proposed acquisition by Whole Foods Market, Inc. of Wild Oats Markets, Inc.

"The District Court’s ruling affirms our belief that a merger between Whole Foods and Wild Oats is a winning scenario for all stakeholders," said John Mackey, chairman, chief executive officer and co-founder of Whole Foods Market. "We believe the synergies gained from this combination will create long-term value for customers, vendors and shareholders."

Jeffrey Schmidt, competition director at the F.T.C., expressed regret over the decision, calling it a loss for consumers and competition.

"We respect the court’s decision, which we currently are reviewing," Mr. Schmidt said. "We brought this challenge because the evidence before us showed that the merger would most likely result in higher prices and reduced choices for consumers who shop at premium natural and organic supermarkets. We are reviewing our options."

The court’s 93-page opinion, which has not been made public yet because of trade secrets contained in the document, marks the latest turn in what has been a roller coaster ride for Whole Foods since announcing the acquisition agreement on Feb. 21.

The F.T.C. in June authorized its staff to seek a federal district court order to prevent Whole Foods from acquiring Wild Oats. In court, the commission contended that the merger would "violate federal antitrust laws by substantially reducing competition in the market for premium natural and organic supermarkets in several geographic areas throughout the United States."

Whole Foods countered that the F.T.C. action "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."

The fight between Whole Foods and the F.T.C. quickly became acrimonious. Mr. Mackey and Whole Foods were embarrassed in July by revelations that he had posted anonymous messages in a Whole Foods investor chat room several years ago. Mr. Mackey apologized for the indiscretion, but the revelations prompted calls for his ouster.

In the wake of the judge’s decision, Whole Foods and Wild Oats agreed with the F.T.C. not to close the merger before noon Aug. 20. Under the agreement and absent a stay pending appeal, the companies may close the transaction at any time after that deadline.

A day before the court decision, Whole Foods announced an extension until Aug. 20 of the expiration of its tender offer for Wild Oats shares. Through Aug. 15, 20,769,895 shares of Wild Oats common stock, equating to 69.4% of the outstanding shares, had been tendered and not withdrawn. Under the agreement, Whole Foods has offered $18.50 per share for all of the outstanding Wild Oats stock in a transaction valued at $565 million.

In early Nasdaq trading Aug. 16 following the judge’s ruling, shares of Whole Foods traded as high as $44.79, up $3.62, or 9%, from the previous close of $41.17. The share price remained well beneath the 52-week high of $66.25.

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