Natural-foods grocer Whole Foods gained 5% in late trading yesterday on the news that it will acquire rival Wild Oats for $18.50 a share, or about $565 million, representing an 18% premium over the shares' Wednesday close. Whole Foods will take on about $106 million in Wild Oats debt. Whole Foods also reported a drop in Q1 EPS to $53.8 million ($0.38/share) from $58.3 million ($0.40/share) a year earlier, missing analyst expectations of $0.41/share. This was the first time profit had fallen in five quarters. Revenue rose to $1.87 billion from $1.66 billion, with a same-store sales increase of 7%. Analysts were expecting $1.89 billion in sales. Wild Oats will be Whole Foods' largest-ever acquisition, giving it new stores in all 11 of its operating regions. Whole Foods recently characterized 2007 as a "transition year" with slower anticipated growth, a forecast that caused Wall Street to hammer the stock. Whole Foods plans to remodel the Wild Oats stores and eventually rebrand them as Whole Foods. Wild Oats shares surged 17% to $18.43 on news of the acquisition.
Sources: Whole Foods F1Q07 Earnings Conference Call Transcript, Press release, MarketWatch, TheStreet.com, Reuters, Bloomberg
Commentary: How Whole Foods' Wild Oats Deal Is Unhealthy for Rivals [WSJ] • Whole Foods, Whole Portfolio? • Whole Foods Faces A Wall Of Worry
Stocks to watch: Whole Foods Market, Inc. (WFMI), Wild Oats Markets, Inc. (OATS). Competitors: WalMart Stores Inc. (NYSE:WMT), The Kroger Co. (NYSE:KR)
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