FTC Seeks to Block Whole Foods Deal

By Sandy Shore
Associated Press
Wednesday, June 6, 2007

DENVER -- The Federal Trade Commission is to file a lawsuit to try to prevent natural-foods grocer Whole Foods Market from acquiring competitor Wild Oats Markets, the companies said Tuesday.

The lawsuit, expected to be filed in federal court in the District, will argue that the marketplace is defined by natural and organic food stores and not the broader supermarket industry, said John Mackey, chairman and chief executive of Whole Foods.

The FTC confirmed late Tuesday that it will seek to block the deal in court. It said that if the deal is allowed to proceed, Whole Foods is likely to raise prices and reduce quality and service.

The planned purchase comes as the natural-food retailers face increasing competition from traditional supermarkets and big-box retailers stepping up their selection of natural and organic food.

The FTC, in previous reviews of industry acquisitions, has included organic and natural grocers in the supermarket marketplace, Mackey said. "We are very disappointed by this decision and we intend to vigorously challenge the FTC in court," he said in a statement.

In February, Austin-based Whole Foods offered to acquire Wild Oats for $18.50 a share in cash, or $565 million, and said it would assume about $106 million in debt as part of the deal.

Whole Foods has extended the expiration date for its tender offer to June 20, the third such extension it has granted. Mackey said the company would probably extend the date again if the federal lawsuit is filed.

The deal must be approved by shareholders of Wild Oats, based in Boulder, Colo., if Whole Foods acquires less than 90 percent of Wild Oats' outstanding stock in the tender offer.

Federal regulators have twice sought information from the two companies about the planned sale and indicated they may challenge it, Whole Foods has said.

Greg Mays, Wild Oats' chairman and chief executive, said the companies think the union of the two grocers will benefit the marketplace.

"While we disagree with the FTC's position and believe it is without legal and factual merit, we are confident that, once presented with the facts, the court will agree that this merger is pro-competitive," Mays said in a statement.

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