Court blesses Whole Foods-Wild Oats; 30 stores could close
The takeover of Wild Oats by Whole Foods has been cleared by a federal appeals court. Equally interesting news is that one of our latest entries about the deal somehow made the Wall Street Journal article on the topic (scroll all the way down).
A new (to us, at least) tidbit can be found in the Wall Street story -- Whole Foods has already sold off 35 of the Wild Oats stores:
The merger will create a more formidable foe for conventional grocers. Still, the companies are relatively small. They would have about 300 stores combined, compared with more than 2,000 at large rivals Wal-Mart Stores Inc. and Kroger Co. Whole Foods also reached a deal to sell 35 of the Wild Oats stores once it closes the acquisition.But according to this piece, the 35 stores that have been sold go by the names Sun Harvest and Henry's Farmers Markets:
Aside from reaching an agreement to sell 35 of Wild Oats’ Sun Harvest and Henry’s Farmers Markets stores to private equity firm Apollo Management LP, Whole Foods has not disclosed how many or which stores it will close.Which Wild Oats stores will close in our area thus remains unknown. Information accidentally leaked last week states that about 30 Wild Oats stores are up for closure. I imagine nothing official will be announced on that score until after the finalization of the merger, which could come next week.
The government filing that contained the 30-store news had some fascinating other material in it, as reported here:
- The opening of a Whole Foods store can cut revenue 30 percent or more in nearby Wild Oats stores.Finally, calls keep coming in for Whole Foods head man John Mackey to step down after it's been revealed that he spent several years posting about his company on Yahoo message boards under the pseudonym "rahodeb." The latest is from the Houston Chronicle:
- Whole Foods set "ground rules" barring suppliers from selling directly to Wal-Mart. "It wants Wal-Mart to have to go through distributors because that raises Wal-Mart's costs," the document said.
- Company documents labeled "Project Goldmine" predicted that buying Wild Oats and shutting down certain stores would increase revenue 85 percent to 90 percent at nearby Whole Foods stores.
- Education is key to the site selection for a new Whole Foods store. "As a company, we look at college graduate density. That's one of the single most important things," the government quoted a company official as saying.
- The takeover will send as many as 80 percent to 90 percent of Wild Oats shoppers to Whole Foods stores, according to Whole Foods documents cited by the government. "As a result, they will unambiguously be worse off," because of increased prices, the FTC argued.
That's something for Whole Foods' board to keep in mind when it begins searching for a new chief executive officer. If that's not on the board's post-merger agenda, it should be....Meanwhile, Mackey's at least temporarily pulled the plug on his own blog, here.
For its part, Whole Foods' attorney argued that because the judge didn't even mention the rahodeb masquerade, it proves the issue is a "sideshow."
Maybe for the merger, but not for investors....
The incident has sparked an inquiry from the Securities and Exchange Commission, and company directors have begun their own probe....
Shareholders have reason to be concerned. Whole Foods' stock has been, to use rahodeb's term, floundering. It's trading at about half what it was in January 2006. Last year, it was the best-performing stock on the Standard & Poor's 500. So far this year, it's down 3 percent.
Mackey may have engaged in his ruse because he believed in his company, and he may have believed what he was saying, but he said it behind the shroud of a screen name, and in doing so, undermined his own integrity.
He resorted to the tactics favored by penny-stock promoters and small-time Internet scammers, and he now finds himself under scrutiny from the SEC.
Whole Foods shareholders deserve better, especially now that the Wild Oats deal appears to be going through.