Whole Foods to Acquire Organic Rival Wild Oats

A WALL STREET JOURNAL ONLINE NEWS ROUNDUP

February 21, 2007 4:22 p.m.

Whole Foods Market Inc. announced an agreement to acquire Wild Oats Markets for about $565 million, greatly expanding the organic-grocery chain's footprint amid stiffer competition.

The move comes as grocery chains such as Safeway and Kroger have been elbowing into Whole Foods' bread-and-butter organic-food business. Wal-Mart Stores has also beefed up its organic offerings. That's boosting some food prices as organic farmers charge more for products such as apples and lettuce.

Under the terms of the deal, Whole Foods, of Austin, Texas, is offering $18.50 a share in cash, which the companies said was a 23% premium to Wild Oats' one-month average closing price. Whole Foods will also assume Wild Oats' existing net debt, which was about $106 million as of Sept. 30.

Whole Foods said it expects to recognize "significant synergies" through cost reductions in overhead, greater purchasing power, increased use of support facilities and new talent.

Wild Oats Markets has annual sales of about $1.2 billion. The company was founded in Boulder, Colo., in 1987 and currently operates 110 stores in 24 states and British Columbia. Its four store brands are Wild Oats Marketplace, Henry's Farmers Market in Southern California, Sun Harvest in Texas and Capers Community Market in British Columbia .

Whole Foods had sales of $5.6 billion in fiscal 2006 and currently has 191 stores in the U.S., Canada and the United Kingdom.

John Mackey, chairman and chief executive of Whole Foods Market, said the acquisition "is a great geographical fit as all of our 11 operating regions will gain stores and three of our smallest regions -- our Pacific Northwest, Rocky Mountain and Florida regions -- will gain critical mass." He said the company "will also gain immediate access into a significant number of new markets."

The companies said Yucaipa Cos., Wild Oats Markets' largest shareholder, has committed to tendering its shares. Whole Foods said it currently expects to close the transaction in April.

 

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