The US Federal Trade Commission (FTC) is to challenge Whole Foods Market’s planned acquistion of rival US and Canadian whole and organic foods chain Wild Oats.
The FTC will file a court order in the District of Columbia seeking to block the deal. It will ask the court to enter a temporary restraining order to block Whole Foods from completing its acquisition of the shares of Wild Oats until the FTC’s request for a preliminary injunction has been resolved.
The FTC contends that the relevant antitrust product market is limited to natural and organic food stores and excludes other supermarkets.
For its part, Whole Foods believes that the FTC’s position is “without basis and contrary to its position in past merger reviews”.
John Mackey, chairman and CEO of Whole Foods, said: the company would “vigorously challenge the FTC in court”.
Mackey said: “The FTC has failed to recognise the robust competition in the supermarket industry, which has grown more intense as competitors increase their offerings of natural, organic and fresh products, renovate their stores and open stores with new banners and formats resembling Whole Foods Market.
“Evidently the FTC does not appreciate the many benefits for consumers of the proposed merger, including our plan to invest capital in and improve many of the stores currently owned by Wild Oats.”
Wild Oats said it would fully cooperate with Whole Foods to fight the challenge and expects that once in full possession of the facts the court will deny the FTC’s injunction.
“We continue to believe very strongly that this merger is in the best interest of all our constituents,” said Greg Mays, chairman and CEO of Wild Oats. “Our associates will benefit from greater opportunities working for a larger combined company, our shareholders will benefit from value creation, and our consumers will benefit from a stronger product offering and the capital investment to upgrade our stores.”
In February, Wild Oats and Whole Foods announced plans to merge under which Whole Foods would buy Wild Oats’ outstanding common stock in a cash tender offer of US$18.50 per share, or approximately $565m based on fully diluted shares, and assume the company’s debt.