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FTC Says Whole Foods, Wild Oats Merger Unhealthy Ruthie Ackerman, 06.05.07, 5:31 PM ET
Whole Foods Market, one of the leading retailers of organic and natural foods, and Wild Oats announced Tuesday that the Federal Trade Commission will file a lawsuit barring Whole Foods from buying its rival because of concern that the acquisition will squash competition in the natural and organic food store market. The FTC’s position is that the organic food store is its own business and that Whole Foods (nasdaq: WFMI - news - people ) would create a monopoly by buying its competitor. John Mackey, chairman and chief executive officer of Whole Foods Market, said both companies will challenge the FTC’s decision because Whole Foods and Wild Oats (nasdaq: oats - news - people ) are by definition supermarkets. “The FTC has failed to recognize the robust competition in the supermarket industry, which has grown more intense as competitors increase their offerings of natural, organic, and fresh products,” said Mackey. This is the exact same argument that has plagued the merger between Sirius Satellite Radio (nasdaq: SIRI - news - people ) and XM Satellite Radio (nasdaq: XMSR - news - people ). Federal Communications Chairman, Kevin Martin, warned the two satellite giants that licenses granted to the companies did not allow them to merge because that would monopolize the industry (See: “ Sirius, XM Want To Make Music Together” and “ FCC Chief Cautions on Satellite Merger”). But the companies argued that they would offer a discount package to consumers following the merger, which the FCC stated was a requirement for combining companies. Since the announcement of the merger on Feb. 19 of this year, shares of the two companies have tumbled. Shares of Sirius have dropped from a high of $4.06 on February 20, the day after the announcement of the merger, to a high of $2.89 on Tuesday, while shares of XM slid from a high of $16.36 on February 20 to a high of $11.29 on Tuesday. The Austin, Texas-based Whole Foods offered $18.50 a share, or $565 million, on February 21 to buy Wild Oats. Whole Foods also agreed to acquire the company’s debt. On March 13, both companies received a second request from the FTC for additional information. Greg Mays, chairman and chief executive officer of Wild Oats, said the company believes that the merger will benefit consumers and shareholders alike. “While we disagree with the FTC’s position and believe it is without legal and factual merit, we are confident that, once presented wit the facts, the Court will agree that this merger is pro-competitive and the FTC’s application for an injunction will be denied, thus allowing us to proceed forward with the merger,” said Mays. Shares of Whole Foods plunged $1.21, or 2.9%, to $40.48 following the announcement, while shares of Wild Oats inched upward 25 cents, or 1.5%, to $17.16. Whole Foods also announced on Tuesday it will open its first store outside North America on Wednesday in London and has plans to open hundreds more across Britain and Europe. The London store will be the largest food retailer in the city. More On This Topic
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