Whole Foods Moves On

At least the long, surreal nightmare is over. Whole Foods Market (Nasdaq: WFMI  ) has come to a settlement with the Federal Trade Commission concerning its acquisition of Wild Oats Market.

Whole Foods will sell 32 stores (13 of which are currently operating), and it will also have to divest itself of intellectual property related to Wild Oats. Employees of the operating stores will be offered guaranteed jobs at other stores or “enhanced” severance packages. Whole Foods will take a $19 million charge related to the settlement proceedings.

It’s a bummer (I mean, come on, Whole Foods took on a lot of debt for this acquisition), but it’s also a relief. This uncertainty has been hanging over Whole Foods for a long while. The outrageous witch hunt the FTC waged against Whole Foods started in mid-2007 and continued even after the FTC’s case was shot down in court and Whole Foods had completed the acquisition. It has only become more absurd, as Whole Foods has seen steadily increasing competition from rivals like Wal-Mart (NYSE: WMT  ) , Safeway (NYSE: SWY  ) , Kroger (NYSE: KR  ) , and Trader Joe’s -- all of which provide organic foods.

Surely the FTC has had much better things to worry about than Whole Foods’ acquisition of Wild Oats (and come on, the acquisition’s gone so “well” that I was recently moved to say thanks for nothing, Wild Oats). According to a Wall Street Journal article, FTC Chairman Jon Leibowitz’s statement on the settlement said that it “allows the FTC to shift resources to other important matters.” Well, no kidding; I don’t think I’m alone in the thought that this proceeding never seemed like a very good use of taxpayer money.

Apparently the resolution will allow us poor, apparently feckless consumers to see “more choices and lower prices for organic foods,” too. I guess the FTC has to stick to its guns on this line of thinking, since it was so stubborn about it. The big problem many of us had with the FTC’s stance from the start was that there are plenty of places to get organic products and that nobody was going to starve to death from theoretical organic-food price gouging. Indeed, Whole Foods has definitely had to address price, as consumers have grown more guarded about their budgets.

I just needed to rant one more time. Sirius XM (Nasdaq: SIRI  ) shareholders can probably sympathize with the need to rant about the FTC. That was another situation -- except that they clashed with the FCC -- in which anybody living in the real world could recognize there was plenty of competition and no monopoly in the making.

The FTC’s antitrust challenge helped insert increased risk into Whole Foods Market stock, so resolution is good news for us long-patient shareholders. At least Whole Foods can finally move on and address the harsh economic headwinds and, yes, the price-cutting competition. It’s about time.

Here’s some related, recent news on Whole Foods:

Wal-Mart Stores is a Motley Fool Inside Value recommendation. Whole Foods Market is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax owns shares of Whole Foods Market. The Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 06, 2009, at 4:53 PM, bt1960 wrote:

    Hindsight yields a clear vision that the merger was not helpful to Whole Foods. The amount of debt assumed coupled with the burden of the acquiring the money-losing business of Wild Oats should have been two monster red flags to the board The FTC gave Whole Foods a way out of the purchase, and yet they persisted for roughly one year to make the acquisition. Everyone knows that there were no tangible monopoly considerations to this transaction, (except the clueless FTC). The disposition of closed stores would have happened regardless, so the settlement on the surface looks like no hardship for Whole Foods. Looks like Colorado and Arizona are the places where a monopoly was inchoate per the FTC, but that's a laugh too. Given Wild Oats blessing of the transaction, one has to assume that Wild Oats, even in a resurrected form, will bite the dust in the short term. I hope we all hold the FTC accountable in some way, shape or form for their complete and utter disregard for facts related to this case. What monopoly did Whole Foods have again when it bought a competitor? Oh, that's right, I think it was their delicious oven fresh bread. I guess I would never be able to buy flour, yeast and salt and make my own. Thank you FTC from saving me from baking on my own bread!

  • Report this Comment On March 07, 2009, at 9:57 PM, thisislabor wrote:

    where do these people // posters come from?

    -

    these people register for one day to make some well thought out and indepth comment on a specific random company that not one other person reads about.

    so funny how the posting community works on TMF boards.... *shrugs* anyways moving on.

    -

    bt1960, did you go through and read the 10-k's on this company?

  • Report this Comment On March 07, 2009, at 9:58 PM, thisislabor wrote:

    I was just curious how you knew so much about this company is all?

  • Report this Comment On March 08, 2009, at 12:28 PM, kurtisj wrote:

    It's about time that they can move on.

    John Mackey should read the freaking manual on anti-competitive statements made by executives to boards. Has he made a public apology to shareholders about these statements yet? I think that we deserve one -- I lost a lot of money because of it.

    See intro:

    http://www.ftc.gov/os/caselist/0710114/070605complaint.pdf

  • Report this Comment On March 10, 2009, at 4:34 AM, dstnewman wrote:

    Yet another FOOLish article that name drops Sirius XM.

    And... it had ABSOLUTELY nothing to do with the article!

    FTC this, FTC that... Oh Sirius XM.. but that was FCC, so its different, but we still need the hits because we all know Sirius brings readers, so lets throw their name out there anyways...

    Pathetic.

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