Whole Foods' Buyout Deal on Hold
Court Seeks More Information In Bid to Take Over Wild Oats
Whole Foods operates 15 stores in Virginia, Maryland and the District, above. Wild Oats has none in this area.
(By Andrew Councill -- Bloomberg News)
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Tuesday, August 21, 2007
A federal appeals court said yesterday that it needed more time to consider whether to block Whole Foods Market's takeover of rival Wild Oats Markets.
The U.S. Court of Appeals for the District of Columbia Circuit put the $565 million deal on hold until it could hear more arguments. The three-judge panel said, however, the decision "should not be construed in any way as a ruling on the merits" of the case.
The Federal Trade Commission on Friday asked the court to stay a decision by U.S. District Judge Paul L. Friedman that allowed the transaction to proceed. The agency has also appealed the decision Friedman made Thursday and wants to block the deal on antitrust grounds.
Whole Foods was blocked "from taking any further steps to acquire the stocks, assets or any other interest" in Wild Oats until the appeals court issues a further ruling, the panel said.
Whole Foods has until tomorrow afternoon to respond to the FTC's request for a stay, the court said. The agency has until Thursday to counter Whole Foods' response.
The companies had agreed last week to refrain from closing the transaction until noon Monday to give the appeals court time to rule on the FTC's stay request, which is the remaining obstacle to moving ahead.
"We . . . hope for a quick ruling that legally clears the way for the merger to move forward," Paul T. Denis, a lawyer for Whole Foods, said yesterday.
The company also said it had extended its tender offer to buy all outstanding shares of Wild Oats until Monday.
Whole Foods agreed to acquire Wild Oats in February for $18.50 per share. The FTC sued in June to block the deal on antitrust grounds, arguing that the two chains compete in a narrow market of "premium, natural and organic supermarkets," and that the combination would stifle competition and lead to higher prices.
The deal would not hurt consumers, the companies said, because of competition from conventional supermarkets, such as Safeway and Kroger, which are selling increasing amounts of organic products.
Friedman's 93-page ruling remains under seal, but a redacted version is expected to be released as early as today. Attorneys who have read the ruling said the judge agreed with the companies that conventional supermarkets are repositioning to compete with organic stores.
Shares of Whole Foods closed yesterday at $43.47, down 83 cents, or 1.9 percent; shares of Wild Oats closed at $17.80, down 12 cents, or 0.7 percent.
