After FTC Settlement What of Wild Oats & Whole Foods Is Left? (WFMI)

Whole Foods Market, Inc. (NASDAQ: WFMI) has reached a settlement agreement with the Federal Trade Commission’s about its acquisition of Wild Oats.   Under the terms of the settlement, Whole Foods will divest the Wild Oats intellectual property and name.  Whole Foods will also sell 32 former Wild Oats stores.

This resolves the matter and now the company can go on.  But investors are left wondering about what Wild Oats really received in acquiring Wild Oats.

A third party trustee will sell the stores and the intellectual property.  Whole Foods will apparently recognize a $19 million settlement.  Among these properties are leases and related assets for 19 non-operating former Wild Oats stores, leases and related fixed assets (excluding inventory) for 12 operating Wild Oats stores and one operating Whole Foods Market store.  The company says that it will be business as usual at the 13 operating stores to be marketed for sale.

The divestiture trustee will have six months to market the assets to be divested, and an extension of up to six months may be granted. The settlement agreement has been placed on public record for a 30-day comment period, after which the FTC will issue a final ruling.

In the first quarter these stores generated about $31 million in sales, or about 1.3% of the company’s total sales.   Again, this is a win.  It allows Whole Foods to go on without a dismantling of a deal it had already closed.

Whole Foods paid roughly $565 million for 110 stores under the Wild Oats name.  Whole Foods was already closing some stores and in October 2007 it sold 35 Henry’s Farmers Market and Sun Harvest Market stores.  It looks like the end result of the acquisition was just an exercise in killing the competition rather gaining a major brand.

Whole Foods shares are up about 2% at $12.03 on the news.

Jon C. Ogg
March 6, 2009