Bear Stearns analyst Robert Summers said Thursday the FTC appears to have ample evidence to mount a successful challenge to the pending merger between Whole Foods and Wild Oats. The FTC posted its case against the $565 million deal on its website earlier in the week (see link below). After reading the document, Summers concluded, "the FTC case against the merger appears solid and [we] are now leaning more toward the FTC prevailing in its injunction." The FTC is basing its case on the premise that Whole Foods is "obsessed with running Wild Oats out of business" by buying it and then taking it apart. Part of its evidence is eight years' worth of postings placed anonymously by Whole Foods CEO John Mackey on a Yahoo Finance message board that touted his own company's stock and spoke derisively of Wild Oats. That evidence supplements material disclosed by the FTC in June, including an email written by Mackey to company executives advocating the "elimination" of Wild Oats as a means of preventing a price war and barring competitors Kroger, SuperValu and Safeway from entering the natural/organic space. Summers classifies the anonymous Yahoo postings as a "distraction for the company as it tries to improve investor sentiment that its growth prospects have rebounded."
Sources: MarketWatch, Business Week
Commentary: Whole Foods CEO Mackey Is Out Of His Organic Mind • Whole Foods CEO John Mackey Makes a Mind-Boggling Mistake • Whole Foods' CEO Found Anonymously Touting His Own Stock
Stocks/ETFs to watch: Whole Foods Market, Inc. (WFMI), Wild Oats Markets, Inc. (OATS). Competitors: The Kroger Co. (KR), SuperValu Inc. (SVU), Safeway Inc. (SWY). ETFs: Consumer Staples Select Sector SPDR (XLP), Vanguard Consumer Staples ETF (VDC), PowerShares Dynamic Consumer Staples (PSL)
Earnings call transcripts: Whole Foods Market F2Q07
Related: FTC's motion for restraining order and preliminary injunction against Whole Foods and Wild Oats
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