Whole Foods Gobbles Up Wild Oats (WFMI, OATS)

Whole Foods Market, Inc. (WFMI-NASDAQ) reported the company signed a definitive merger agreement with Wild Oats Markets, Inc. (OATS-NASDAQ) under which Whole Foods Market will acquire the outstanding common stock of Wild Oats Markets in a cash tender offer of $18.50 per share.  This is a cash deal, so despite the WFMI earnings, the OATS buyout should not be deemed as vulnerable to price fluctuations as that of WFMI.  Keep in mind that OATS has a trading range of $13.88 to $20.60 over the last 52-weeks, but in the year before that OATS had traded down under $10.00.

We’ll see if OATS has many holders that fight the deal, but that is at least a starting point.  At the close OATS was down 0.4% at $15.72 and had a market cap of $463 million.  Whole Foods (WFMI) shares are up nearly 4% at $47.25 in after-hours trading.  The market is happier to see them taking a competitor out of the organic market place than they care about earnings.

Here are the exceptions:  Whole Foods Market has agreed in the merger agreement to commence a tenderoffer on February 27, 2007 for all of Wild Oats Markets’ outstanding commonstock.  The tender offer is conditioned upon at least a majority of theoutstanding Wild Oats Markets’ shares being tendered, as well as customaryregulatory and other closing conditions.  Wild Oats Markets’ board ofdirectors has unanimously recommended that Wild Oats Markets’ stockholderstender their shares in the offer.  The Yucaipa Companies, Wild Oats Markets’largest shareholder with approximately 18% ownership, has committed totendering its shares.  Approval of the transaction by Whole Foods Marketshareholders is not required.  The tender offer will expire within 30 days,subject to extension and to the receipt of customary regulatory approvals.Whole Foods Market currently expects to close the transaction in April.

Jon C. Ogg
February 21, 2007