FTC: Whole Foods-Wild Oats Merger Would Thwart Competition

Includes: OATS, WFM
by: Judith Levy

Whole Foods Chairman and CEO John Mackey may have inadvertently cooked the Wild Oats merger's goose through his choice of words in an email to directors of the company advocating the tie-up. That email has since been used by the FTC as evidence of anticompetitive behavior, according to court records released Tuesday. "By buying [Wild Oats]," Mackey wrote, "…we eliminate forever the possibility of Kroger, SuperValu or Safeway using their brand equity to launch a competing natural/organic food chain to rival us...[Wild Oats] is the only existing company that has the brand and number of stores to be a meaningful springboard for another player to get into this space. Eliminating them means eliminating this threat." The FTC filed suit in June against Whole Foods to block the proposed $565 million merger on the grounds that the resulting company would control the natural foods market and squelch competition. Mackey's emailed comments represent "an awesome antitrust admission by the founder and CEO of the company," said antitrust lawyer Robert Doyle. WFMI 20 June 2007 OATS 20 June 2007Mackey has countered that it is disingenuous of the FTC to object to the reduction of competition as the motivation for a merger. "This is so self-evident to me that I really can't understand why the FTC wants to make a big deal out of it," he posted on the company's website. "If the FTC is opposed to the elimination of all competition, then I don't understand why they approve any mergers?"

Sources: Wall Street Journal, CNN.com, Bloomberg, Reuters
Commentary: Whole Foods/Wild Oats to Challenge FTC Opposition to MergerFTC Offers Perplexing Explanation On Whole Foods-Wild Oats MergerFTC Deals Setback To Whole Foods-Wild Oats Merger: Flawed Logic in the Extreme
Stocks/ETFs to watch: Whole Foods Market, Inc. (WFMI), Wild Oats Markets, Inc. (OATS). Competitors: The Kroger Co. (NYSE:KR), SuperValu INC. (NYSE:SVU), Safeway Inc. (NYSE:SWY). ETFs: Consumer Staples Select Sector SPDR (NYSEARCA:XLP), Vanguard Consumer Staples ETF (NYSEARCA:VDC), PowerShares Dynamic Consumer Staples (NASDAQ:PSL)
Conference call transcripts: Whole Foods Market F2Q07,

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