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Wednesday, August 22, 2007

The Whole Foods-Wild Oats saga continues

The proposed takeover of Wild Oats by Whole Foods continues to be tied up in court. On Monday the federal Court of Appeals for the D.C. Circuit left the deal on hold while it considers additional legal arguments in the case. Federal Trade Commission regulators are trying to block the merger, saying that it would create too big a market force in Whole Foods, hurting consumers. Whole Foods says its offer will stay open until Monday, but it's not clear whether the court will have an answer by then. (Some wonder whether the Bush folks would be so upset if this were Safeway and Kroger, or Wal-Mart and Target. Are they just picking on the hippies?)

Meanwhile, the CEO of Whole Foods, John Mackey, is turning out to be quite a character. Apparently he sent around some e-mails to his board of directors touting the upcoming merger as a way of stopping price competition between the two companies. According to Reuters:

The FTC had shown the judge e-mails that Mackey sent to the Whole Foods board of directors in which he said the deal would prevent a price war between the two organic grocers. In one message, Mackey said eliminating Wild Oats would head off new competition "forever, or almost forever."
The lower court judge hearing the case said the e-mails didn't matter, and that the deal was not anticompetitive enough to be blocked. But the appeals court has now vacated that decision and temporarily stopped the transaction from proceeding.

Mackey's been a busy guy on the internet. For quite a while there, he was apparently posting on Yahoo message boards about his company -- and about Wild Oats -- using the pseudonym "Rahodeb." His comments about Wild Oats were interesting. He ran the company down in the period preceding the Whole Foods takeover bid. The lower the Wild Oats stock price, of course, the sweeter the merger price for Whole Foods. And that's got some folks crying foul.

As the Times recently reported:

In the court document, F.T.C. lawyers cite a remark that Rahodeb wrote about Wild Oats to bolster its case. “Whole Foods is systematically destroying their viability as a business — market by market, city by city.”

When the merger was announced in February, Mr. Mackey said he had previously tried to acquire Wild Oats about six years earlier but the deal fell through. About that time, in April 2001, Rahodeb had this to say about Wild Oats: “I find it simply amazing that some investors continue to have faith in this company.”

Rahodeb added later in the same posting, “The ‘emperor has no clothes’! Am I the only one who sees this?”

Whole Foods’ public relations staff declined to comment yesterday, and Mr. Mackey was not available for comment.

On the company Web site, Mr. Mackey wrote on Wednesday night that his online postings were simply for fun and that he never disclosed proprietary company information. He said he often took contrary positions for the sake of argument.

“Rahodeb’s postings therefore do not represent any official beliefs, policies or intentions by either Whole Foods Market or by me,” Mr. Mackey wrote.

David Gardner, co-founder of the Motley Fool and a longtime champion of Whole Foods stock, said it would be difficult for Mr. Mackey to continue leading the company since its code of conduct and ethics warns against such activities.

The code reads: “Team members have a primary business responsibility to WFM and are expected to avoid any activity that may interfere or have the appearance of interfering with the fulfillment of this responsibility.”

“You look at this and say it looks like he acted in violation of his own code,” Mr. Gardner said. “I clearly think he should step aside for a while.”


Anyway, until the legal battles are concluded, we won't know whether the two companies are actually going to combine. And if it turns out that they are, it will probably be a while longer before we hear which Wild Oats stores are going to be closed.

Comments (16)

And to think that the Whole Foods I knew in Austin as a kid was a little store on Lamar, down the hill from Clarksville, when that was still student housing projects, punker houses, communes and bikers.

With a little luck Freddy or Winco will buy 'em out and prices will be more affordable.

prices will be more affordable

Just buy Chinese. Much cheaper. As for Wild Oats, those stores will close, merger or no. It's just a matter of time.

It is kind of weird how they site these things within walking distance of each other which I don't get, but then HomeDepot/Lowes have the same thing going on.

I don't get what they get when they buy WildOats besides more of the same. Don't say it too loud, but buying Trader Joes (German company) makes a lot more sense to me, 'cause they'd be more likely to get new customers than with WildOats.

Don't you find it a little curious after the past decades of major corporate mergers of all sorts that all of sudden a merger of the organic food sales industry needs federal oversight. Dirty Hippies!

"(Some wonder whether the Bush folks would be so upset if this were Safeway and Kroger, or Wal-Mart and Target. Are they just picking on the hippies?)"

John Mackey is a well-known libertarian/conservative....not much of a hippie. And Whole Foods isn't exactly a Bohemian farmers' market. Its not nicknamed "Whole Paycheck" for nothing.

"Just buy Chinese."
Don't do that! Just buy local from your Farmers Market, grow it yourself or at least go to a locally owned grocery store.
Think about how much energy and resources are used to transport stuff from China to here. And then think about how safe that "cheap" food can be. Yikes.

Several years ago I read that 1 in 5 $ spent on food in U.S. went to Kroger. So! what's the problem here. Maybe, Just maybe, Whole foods can stop Kroger & Wal-Mart from tasking over the organic market

Maybe it's me, since we buy the bulk of our groceries at Winco or Albertsons. But I've always considered Whole Foods an outrageously expensive place to buy groceries of any type. When they opened their store in Tualatin, I was appalled at the prices for even the most mundane items. No wonder they have the nickname "Whole Paycheck"!

I've always considered Whole Foods an outrageously expensive place to buy groceries

One more time: you want the cheapest prices, you'll have to buy the Chinese stuff with its slave labor and poisons. If you want good stuff, it comes at a (higher) price. Keep diving for the bottom of the barrel, and pretty soon it will be your only choice. But you don't have to put your money in Mackey's pocket. There are lots of ways, especially hereabouts, to deal directly with the producers.

There are lots of ways, especially hereabouts, to deal directly with the producers.

But it is still prohibitively expensive for most people...
I make good money, but if I bought all of our produce from the farmers market, that alone would exceed my entire grocery budget for the month.
I consider Safeway and Haagen the two most expensive stores for produce around here, but they are cheap compared to the local boys.
Its good stuff, but I just cannot afford it all the time.

This CEO has always struck me as something of a wingnut. I guess that explains his love of posting to blogs.

When they open the new Whole Paycheck down the street from me in Hollywood I’ll probably buy a few things there. Other than that it will still be the farmers market for veg, New Seasons for meat and WinnCo for cheapo brand-name stuff I just can’t stop myself eating.

Let me put in a second plug for “The Omnivores Dilemma.” The author spends a lot of time on the Whole Foods model of industrial “organic” food. Let’s just say it seldom matches the pictures on the packaging.

News Flash Allan L.! Maybe one of the reasons I've got more than enough money to retire (low 7 figures) is that I don't p*** away my hard earned money at places like "Whole Paycheck". Have a nice day!

I can add another wrinkle to this story that you won't hear anywhere else. The FTC, in its bid to shut this merger down, has subpoena'd New Seasons' financials and business plan? Why, you ask? Because Portland is the only market where Whole Foods hasn't come into and dominated. Yeah, I can't believe that BS either....

As if that weren't enough, WHOLE FOODS has subpoena'd New Seasons' numbers too. Last time I heard, the company has refused to release any of this and is in contempt.

Personally, I'm outraged they'd use their merger as an excuse to look into a private, small company's books. The bottom line is, money talks and ethics walk when it comes to any business sector. When customers are given the choice to shop at a hybrid market like New Seasons, they jump at it... this is where tastes are headed in the coming years, and Kroger/Wal-Mart/Safeway know it. They're using the 'free market', er, the government to ensure they get their cut...

Anyone else pisseed??

"In contempt"? Contempt of the federal court? If true, that would be a serious matter.

TKrueg's comment was worthy of a separate post on the New Seasons angle. It's here.

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