Shares of Wild Oats soared 18.3% to close at $18.00 in AH trading Thursday after a U.S. District Court judge refused to grant the FTC's request to block Whole Foods' pending $565 million acquisition of its smaller rival. Whole Foods gained 8.3% to $44.60 on the news. If the FTC elects not to pursue an emergency appeal, the deal could be completed by next week. The FTC argued the merger would inhibit competition in the already narrow organic and natural foods sector, but Judge Paul Friedman decided it would not violate antitrust laws. Whole Foods' Chairman and CEO John Mackey hailed the judge's decision, calling it "a winning scenario for all stakeholders." Mackey is under fire for having anonymously touted his company's stock and derided Wild Oats on a Yahoo message board over an eight-year period. The SEC and Whole Foods are investigating the postings, and Mackey has apologized for his "error in judgment." Mackey also sent an email to his board claiming the merger would help Whole Foods eliminate "almost forever" the threat that a rival could enter the organic space. "Even with all that documentary evidence that suggested Whole Foods viewed Wild Oats as its main competitor and wanted to eliminate it, the government still didn't win its case,'' said Washington antitrust lawyer Charles Rule. The FTC, meanwhile, has improperly released confidential documents related to the case, and is being investigated by Whole Foods for the blunder.
Sources: MarketWatch, Bloomberg, Reuters, TheStreet.com, The Motley Fool, Wall Street Journal
Commentary: FTC Lets Whole Foods Trade Secrets Out Via Microsoft Word • Whole Foods-Wild Oats Merger Goes Before Court • FTC Case Strong Against Whole Foods/Wild Oats Merger -- Analyst
Stocks/ETFs to watch: WFMI, OATS. Competitors: KR, SVU, SWY. ETFs: XLP, VDC, PSL
Earnings call transcripts: Whole Foods Market F3Q07
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